Buying a home is no small deal, and the purchasing process is far more complex than the majority of other items you might buy in your lifetime. It’s a rare real estate transaction indeed in which the buyer pays the list price, and everyone lives happily ever after! A more realistic scenario involves making an offer, negotiating the terms and putting it all down on paper.
While this sounds intimidating, there are a number of ways you can “prepare for battle” with a seller and ensure you get the best price. Below, you’ll find all you need to know about offers and counteroffers, as well as some tips and tricks to boost your negotiating game.
Making an Offer
When you’ve found a property that ticks all the right boxes, it’s worth thinking carefully about your offer. If accepted, it will become legally binding, so be sure you have the necessary funds to complete the sale or you may run into huge problems later on. Knowing the ins and outs of the closing costs (plus all there is to know about the hidden costs of buying a home) and obtaining a pre-approved mortgage is essential, and will ensure that you’re viewing houses that fall within your realistic budget. Moreover, you should make sure the mortgage costs will not be overwhelming: mortgage affordability is worsening in many cities across the country.
Do your market research and be sure that your offer price is viable. It’s worth knowing whether the current market favours the buyer or the seller, as this can have an impact on what kind of offer you make. For example, in a seller’s market, you’re less likely to get away with a lowball offer. Consider also your own circumstances – if this is the home of your dreams and the price seems okay, is it worth offering too low when someone else might jump in and snatch it away?
Also, check how long the house has been on the market – if it’s a new listing, chances are other people will be making an offer. If it’s been on the market for several weeks, however, you might get away with making a lower offer.
Since your offer is legally binding, it’s in your best interest to make a conditional offer. This gives you a little wriggle room and allows you to back out if certain conditions aren’t met. Typical conditions concern obtaining the relevant financing, the results of a home inspection (there are certain red flags that should definitely make you reconsider) and the successful sale of your current home.
Know Your Opponent
Knowledge is power, and this is certainly true when negotiating a real estate transaction. Read all about the most important real estate terms you’ll come into contact with and discuss them with your agent. Also, the more you know about the seller and their circumstances, the more able you will be to tailor an attractive offer that is likely to be accepted. If the seller needs a fast sale, for example, you can step more boldly than if they’re not in any rush to sell.
Check also how much interest the house has attracted since being on the market. Have other people visited yet, or have any offers already been rejected? A good real estate agent can help you learn more about the seller, often by speaking with the listing agent and getting more details.
Countering a Counteroffer?
Often, your offer will be met with a counteroffer from the seller. It’s worth noting that this comes with a short expiration period – typically 3 days – and that it can be canceled by the seller at any time prior to your response. As such, it’s worth acting fast. Read over the counteroffer, and if all sounds good, accept it! If you want to negotiate further, you can send your own counteroffer, detailing your new terms.
Often, you’ll negotiate over the price, but you may negotiate other details, including repairs to be carried out, appliances you wish to include in the deal, the desired closing date and asking the seller to cover the closing costs. These back-and-forth negotiations can continue until both parties are happy with the transaction. Nothing is legally binding until both parties sign the same contract.
Rejecting a Counteroffer
The buyer may also choose to reject a counteroffer. Perhaps the price is too high, the closing date is too soon, or the house isn’t in the state they had anticipated it to be in. Maybe something better came along. The buyer can formally reject the offer and look elsewhere, or else just allow it to expire.
Negotiating a real estate deal can be likened to a game of chess, with each player taking turns to steer the transaction to their best advantage. If all goes well, both seller and buyer will be happy with the result. And don’t forget that research can help you maintain a strong position, while a good real estate agent will provide valuable insight and advice.