6 TIPS TO NEGOTIATING YOUR BEST PRICE ON A HOME IN A HOT MARKET
When you are looking for a new home in a hot market there are certain steps that we recommend you take in preparation of making an offer. In a hot market, homes can have multiple offers within 24 hours. With the proper mindset and preparation, you can increase your probability for success.
1. Know the sellers’ position
Ask your agent for information to help you understand the sellers’ financial position and motivation. Are they facing foreclosure or a short sale? Have they already purchased a home or relocated, which may make them eager to accept a lower price to avoid paying two mortgages? Has the home been on the market for a long time, or was it just listed? Have there been any previous offers? If so, why did the seller not accept them? The more signs that sellers are eager to sell, the lower your offer can reasonably go.
2. Work back from a final price to determine your initial offer
Know in advance the most you are willing to pay, and with your agent’ guidance work back from that number to determine your initial offer, which can set the tone for the entire negotiation. A too-low bid may offend sellers emotionally invested in the sales price and you may not even get a response. A too-high bid may lead you to spend more than necessary to purchase the home. Work with your agent to evaluate the sellers’ motivation and comparable home sales to arrive at an initial offer that engages the sellers yet keeps money in your wallet. Negotiations can be a smooth process where everyone wins. However, if you are competing against multiple offers, you should consider offering the highest and best price you’re willing to pay because you may not get the opportunity to negotiate if the seller accepts a different offer.
3. Avoid Contingencies
Sellers favor offers that leave little to chance which equates to the least amount of risk. Keep your bid free of complicated contingencies, such as making the purchase conditional on the sale of your current home. You should keep contingencies for a mortgage loan approval, and inspections typical in your area, like mold, termites and radon.
4. Remain Unemotional
Buying a home is a business transaction and treating it that way helps you save money. Consider any movement by the sellers, however slight, a sign of interest, and keep negotiating. Each time you make a concession, ask for one in return. If the sellers ask you to increase your price, ask them to contribute to closing costs or pay for a home warranty. If sellers won’t budge, make it clear you’re willing to walk away; they could get nervous and decide to accept your offer. Buying a home can be emotional but negotiating the price shouldn’t be. The key to saving money when purchasing a home is sticking to a plan during the turbulence of high-stakes negotiations. A real estate agent representing you can guide you and offer advice, but you are the one who must make the final decision during each round of offers and counter offers.
5. Don't let competition change your plan
Great homes and those competitively priced can draw multiple offers in any market. Try not to let competition propel you to go beyond your predetermined price or agree to concessions — such as waiving an inspection — that may not be in your best interest.
6. Be ready financially if you are financing
Getting pre-qualified for a mortgage proves to sellers that you are serious about buying and capable of affording their home. That will push you to the head of the pack when sellers choose among multiple offers. They will go with buyers who are a sure financial bet, not those whose financing is shaky. We recommend a local lender who is familiar with the market, especially if you are buying a condo or a waterfront home.
Thank you for sharing your time with us today. Please call or text us today if you are interested in learning more about the local real estate market. The Tom Smith Team is ranked in the top 1% of all agents in Pinellas County with over $100,000,000 listed and sold.
Tom Smith, 727-776-3375, Tom@TomSmithTeam.com
Kristin Vincelli, 727-686-1596, Kristin@TomSmithTeam.com