Negotiating the Lowest Price for Your New Home

As different as home buyers are, we all have one thing in common - we all want the to pay the absolute lowest price for our new home.  I've been a home buyer too, so I know how important it is.  As with any form of success, there are time-tested methods for achieving the lowest cost. 

Get Pre-Approved

Nothing makes a seller want to pull their hair out more than taking the time to negotiate seriously with a potential buyer whom they later find out wasn't even qualified to purchase their home in the first place.  It's a waste of everyone's time - the buyer's, the seller's, both agents', and anyone else who might be involved in serious negotiations.  Establishing your credibility as a home buyer is the first endeavor you should undertake before beginning the purchasing process.  How is this done?  By taking the time to review your financial situation with a mortgage lender, then developing the appropriate strategy with your lender and agent.  It often takes less than 30 minutes to prequalify with a lender, and this can be accomplished with a phone call.  Once this is accomplished, shop your lenders for the best interest rate, choose your lender, then get pre-approved.  It shows everyone involved that you have the potential to be a serious home buyer - one to treat with respect and dignity.

Get a Home Inspection

Obtaining a good, accurate home inspection after contracting is highly recommended and extremely important.  Although you may have purchased homes before or worked in the construction industry, every home is different.  Protect yourself from purchasing the unknown by hiring your own trusted home inspector to inspect your proposed property prior to finalizing your contract or before your option period expires - locking you into your contract and eventual purchase.  Home inspections serve many functions in the purchasing process.  It can also serve as the factual basis to renegotiate the purchase price with the seller if items are found to be in disrepair.  When it's time for renegotiation, you'll want a detailed and thorough list of items requiring cash expenditures so that you're not financially harmed in the purchase of your new home.  Although home inspections may cost $200 to $300, you could eventually save thousands of dollars in potential repairs just by taking the time to hire a reputable, licensed home inspector in your area.

Negotiate with Motivated Sellers

It's important to know that while many homes or properties might be available in your area, not all of them are going to sell.  In reality, not all homeowners even really want to sell.  It seems remarkable to think that someone would go to all of the trouble to list their home and not really want to sell it, but it's true.  If you really think about it, it's a bit like establishing the credibility of home buyers.  Many people might tour homes in their area, stating that they really want to move to the area or purchase a new home, but we all know that's not really reality.  Of course, they'd take a home if it were offered for free, but it's another matter altogether when we're talking about having the ability to purchase.  In the same light, many sellers would offer their home or property for sale, if someone were to come along and offer them twice it's current value.  That's not reasonable or realistic. 

When purchasing a home, you'll want to work with sellers who want to sell their home at a reasonable price.  You'll also want to ensure their home's been on the market for a while (but not too long) so that they're willing to consider offers below their asking price.  If a home has just been offered for sale, chances are that the sellers aren't desperate to sell their home just yet.  They're reasonably confident that they're going to sell it for top dollar.  However, as time comes and goes with no one offering top dollar for their home, they normally become increasingly willing to look at less-than-ideal offers that they can at least accomplish their goal of moving to their next home without too many sacrifices.  This is the type of seller you'd like to work with.

Be wary of homes that have been on the market longer than twice the Average Days on Market (DOM) for your area.  Ask your agent what the average DOM is for homes in the price range, square footage, and area that you're interested in moving to.  Once homes have passed the average DOM, you'll typically see prices reduced somewhat.  These are typically homes that either need extensive repairs or ones that have sellers who aren't particularly interested in selling.  Of course, there are exceptions to this rule, so use your best judgment.  Motivated sellers can save you thousands.

Keep the Lines of Communication Open

Never get offended by a counteroffer from the someone who is attempting to sell their home.  It could come back to haunt you.  Instead, submit your offer, review any counteroffers or offer rejections, and make an unbiased decision on whether it meets your needs.  Always "counter" a counteroffer if you're interested in the home.  There's no reason not too.  Sellers often enjoy "trading" and haggling over prices.  Sometimes, the sale of a home isn't even about the money involved, it's about personalities and how willing you are to be flexible.  That's not to say that you'll let them take advantage of you, but you do want to keep those lines of communication open by continuing communicate on a regular basis.  It could very well be that the home you eventually purchase may be purchased from a seller who's had a little time to re-think your offer - weeks later.

Make Reasonable Offers

This is a big one.  Here's the big picture - people who are desperate to sell their homes are not typically in the position of being able to hire an agent to represent them in the sales process.  It does happen, but it's not the norm.  What does that mean to you?  If you're an "investor" or someone who will make a habit of offering 50% of a home's current market value in order to test the seller, you're going to be sorely disappointed.  This is not the way to go about saving money on the purchase of your next home.  True investors do their own market research, intensely watching the market for distressed or tax lien properties in order to achieve the maximum savings on investment homes.  They normally don't intend to live in them, they intend to extract income from them.

When you're talking about the home you're going to live in, the last thing you'd ever be interested in doing is offering the seller so little for their home that they become offended.  If this is the home you've been after, you want to keep the lines of communication open, saving money wherever possible.  If the seller stops talking to you and discounts your credibility as a home buyer, you're finished.  As a home buyer, your savings might typically range from 1% to 10% based on sound deductive reasoning and superior negotiating skills.  Be realistic, do your homework, and be prepared to negotiate all reasonable offers.

How do I use MLS Search?

What's a Buyer's Agent?

Do I need a Buyer's Agent?

How Much Will It Cost to Hire My Own Buyer's Agent?

How Can I Be the First to Know About New Listings?

What Services Should a Buyer's Agent Provide?

How Can I Get the Best Deal?

Do I Need a Home Inspection?