Points of negotiation for a home purchase change with the prevailing market

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Published Date 9/23/2020

When Realtors say “everything is negotiable,” most buyers assume they’re talking merely about the purchase price of a home. But these days, when home prices are up, and interest rates are down, it’s truly the conditions in your local housing market that determine whether your offer leads to a timely and successful transaction.

Redfin’s Mekaila Oaks advises that an experienced real estate agent should have a deep understanding of local market dynamics and be a master negotiator. “Hiring an agent to help you find a house and negotiate its purchase is well worth the cost, especially in a competitive market,” she says.

Oaks reminds us that with a buyer’s market that’s ripe for concessions from the seller, it’s not unusual for buyers to see offers as low as 10% under asking price being accepted. It’s also common to negotiate to have the seller pay the closing costs or name their desired closing date. However, in a seller’s market where buyers are no longer in the driver’s seat, many Realtors say it’s best to avoid lowball offers.

“With plenty of homebuyers clamoring to purchase their home, you need to make your offer easy to understand and limit your requests when it comes to negotiating,” says Oaks. “Of course, standard contingencies related to a home inspection, appraisal, and financing are acceptable. But be aware that you might be competing with buyers who won’t ask for them, and those buyers can act quickly. In this type of market, you need to be decisive, ask for just the essentials, and be wary when negotiating.”

No matter what type of market you find yourself in, however, there will be variables. A lack of urgency on either part of either buyer or seller is one of them. “When neither party has an urgent need to buy or sell, there is no reason to quickly push to finalize a transaction,” says Oaks. “But, if you are ready to buy, don’t drag your feet for too long. There could be other buyers ready that may make a clean offer with fewer contingencies and win the deal.

Other variables in addition to the price of the home include the mortgage loan points, closing costs (which will can typically range from 2% – 5% of the purchase price), the timing of the move-in date and even the timing of the move-OUT date (perhaps the seller prefers to stay and rent their former home out for a while). Industry-standard is to allow 30 days for all of this to happen, but this is also negotiable. Then there is the cost of a home warranty, the repairs stemming from a home inspection, household fixtures, furniture, and cosmetic updates. “When you negotiate on a house, you will hear the same advice again and again: separate yourself from the outcome and keep your emotions out of the transaction.”

Real estate agents don’t get upset if a seller declines a negotiation point and presents a counter, even though there can be emotion on the parts of the buyers and sellers. The important thing is to come to negotiations with knowledge of your local market and a list of reasonable negotiation points to consider. That way, you will be armed with purchasing power no matter the market conditions.

Source: Redfin | TBWS

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