Anyone buying a property wants to get the best price. A smart offer can not only help successfully close the deal, but you could save thousands of dollars, both upfront and over the life of a mortgage.
Here are five tips to help you get into a better negotiating position:
1. Read the market.
2017 is likely to remain a seller’s market for the most part, though buyers are expected to have more choice in 2018 or 2019. It helps to be aware of this so you can set your expectations, says Brad L’Engle, a real estate attorney and loan originator with the L’Engle team at Guild Mortgage in Folsom, California. If demand is hot and properties are scarce, he says, you may not want to play hardball or you may find your potential seller looking elsewhere.
2. Be realistic about price.
The seller’s market means one of the toughest dilemmas you may have is figuring out when a house you’d love to buy is beyond your means. “I had one buyer who wanted to see a house that had come on the market at $385,000, even though the highest price she had been planning to bid was $375,000,” recalls Becky Lund, a real estate pro in Fair Oaks, California. “The house was completely updated, with great views, just amazing, and I could see right away that it was going to get multiple offers.”
However, against Lund’s advice, the buyer was so excited that she decided to pull money out of her 401(k) to bump her bid up to $394,000. In the end, the house ended up selling for $415,000. “What I tell buyers is that if there’s an incredible house and you’re already at the top price you can handle, you’ll almost certainly be outbid,” says Lund. “And you can save a lot of time and emotion and frustration if you just move on.”
3. Don’t make unworkable “lowball” offers.
The housing market has heated up in many parts of the country, so you should avoid getting tough with the sellers. “We’re not in a market anymore where you can lowball somebody $20,000 below the list price,” L’Engle says. “Clients should look at the listing and selling prices in a given area to help determine what’s reasonable. If you’re a buyer, don’t lose your bid on a house to save $5,000.”
Lund agrees: “If you’ve found your dream house, do you really want to let it go for a $5,000 difference?
4. Do your homework.
L’Engle advises buyers to check their Multiple Listing Service (MLS) to find out how long the house has been listed. If it’s been on the market longer than the average amount of time for your area, the seller may be ready to bargain. Any problems with the house? Disclosing this information is required by law.
5. Get pre-approved for a mortgage.
Getting pre-approval on a mortgage means you will know your price range and have a better chance at a smooth closing. “Any agent with experience and talent would not work with a borrower who has not been pre-approved by a lender, and preferably a lender the agent has worked with before,” L’Engle says. “Otherwise, your deals are going to fall apart more often than not.”