Negotiating a home purchase is something most people only do a few times in their life, while their agent likely participates in these negotiations regularly. You should lean on your agent’s negotiation experience. Your agent is likely getting paid a ton of money (3% on a $500K house is $15K) to represent you and the negotiation is one area that the agent can earn some of this money.
That being said, you should also be aware that your agent’s incentives are not aligned with you and they might not be as skillful a negotiator as you may think. Some are awesome, but many others have just a high school degree and little experience. Additionally, think about the conversation between the buyer and listing agents. They both make more money if the buyer pays more, and they both might not earn anything if they are not able to reach a deal.
You ultimately are the one that will be paying for this home. At FlyHomes, we believe in coaching you through the negotiation, but ultimately we understand the misalignment of incentives and we want to make sure you know how to negotiate a deal in a seller’s market:
Seller’s Market Negotiations:
- Market Research: Know the market. Is it a buyer’s or seller’s market? How hot is the specific neighborhood? How many bids are typical? Do homes sell at a discount or premium to list price?
- Your Agent: Do not tell your agent how high you will go. Would you tell the sellers how much you’re willing to pay? Your agent is a tool you should leverage but keep them on your side.
- Home Search: Do not fall in love with one home. In a seller’s market, there is a very good chance you might not get a home you bid for. Find 1-3 homes that you’d like to buy and begin negotiations.
- Information: Your agent should find out what is most important to the seller. Do they want to close quickly? Why are they moving? These items should be incorporated into your offer.
- Terms: Keep the terms simple. Use the standard terms in the contract. Make sure you’re pre-approved. Remove any unneeded contingencies. Ask the seller if you can have the home pre-inspected. Often times, the real deciding factor in a seller’s market negotiations is terms.
- Offer Letter: Include a personal letter that makes you more than just an offer to the seller. You want to be seen as a person that has a face and name that loves their home.
- Alternative: If you fall in love with one home and expect there will be multiple offers, you should make your highest offer something that a seller can’t turn down. You should make this offer the minute you walk out of the house so that no others have a chance to bid. Your offer needs to be so good that a seller has to consider and accept it before seeing other offers.
Ultimately, in a seller’s market, know what you are willing to pay, stay away from wrangling, and keep your offer simple. You’ll find a home, but make sure you are patient. There are multiple agents talking to and being fed the same information by the seller’s agent, and there’s a good chance somebody might be willing to pay more than you.