Real Estate Negotiation Tips For Homebuyers
Found the dream home in Chicagoland that you want to move into? Congratulations! Now it’s the time to know real estate negotiation tips for homebuyers in Greater Chicago.
Buying a new house can be an exciting process, especially in a buyer’s market. As long as you’re not in a huge rush, it can be fun to look at different areas and different types of homes, to imagine you and your family in each of these different situations. Eventually, you will find a home that is to your liking, and that’s when the intensity ratchets up a notch: it’s time to make an offer.
Certain tricks give you the upper hand in real estate negotiations.
What Is An Offer?
When you are planning to make an offer on a home, there are a lot of things to consider, but first and foremost you want to know all the ins and outs of exactly what it means to make an offer. When you make an offer, you are essentially filling out a contract. Often times, your agent will provide you with standard offer form for you to fill out. Once sent to the sellers, they have the option to accept it outright, so double check to make sure you are offering exactly what you want to. That being said, an offer includes the price you are willing to pay, in addition to some other elements, including:
In real estate, when you make an offer, you are essentially filling out a contract.
Earnest Money: an “ante” to start the negotiation and show good faith. The amount of earnest money is your decision as the buyer, but remember that it is a big indication to the seller about how serious you are about purchasing their home. Generally, earnest money will be somewhere between $500 to 10% of the price. Remember that earnest money is a deposit with a third party to hold you accountable for the contract. Once you enter into a contract with a seller, you may lose that deposit if you breach the contract.
Real Estate Contingencies: if you are waiting to be approved for a loan, you most likely will want to make the offer contingent on approval from your lender. In addition, to protect yourself, you could also make the offer contingent on the home passing inspection and attorney review.
Fixtures: when you see a home listed on the MLS, it will include what personal belongings of the sellers will stay with the house and what will go on the MLS sheet. Pay extra close attention to this. They may have forgotten to list something that you want, or you may really want something they wish to take with them, but either way, this can be a big negotiating point.
Find out what the home’s worth then choose the fixtures you want to negotiate for.
Real Estate Offer Expiration Date: in order to keep things moving, set a date that your offer will expire. This not only will help get the deal done faster but will also give the seller incentive to focus on your offer rather than wait around for others to come in.
Closing Costs: as the buyer, you will be responsible for a larger chunk of the closing costs, and asking for help from the seller in this area is another way to negotiate if they are stuck on a price.
Negotiating Do’s And Don’ts
Put yourself in the seller’s shoes, show your empathy.
Once you have submitted an offer, the sellers have the choice to accept it outright, completely reject it, or send you a counteroffer. Unless you made one heck of a good or bad offer, you will probably get a counteroffer. That is where the fun begins, and when you and your realtor need a plan to make sure you get the home you want at a great price.
DON’T lowball. Submitting a lowball offer is insulting to the seller, who most likely has an emotional attachment to the house they’re selling AND an over-inflated perception of its value. Their listing price may reflect that, but make an offer that signals that you are open to negotiating and that there is a possibility of meeting in the middle, rather than a waste of time.
Low ball offer may hurt seller’s emotion.
DO use your first offer as an opportunity to gauge the circumstances of the seller. This is a real estate negotiation, and leverage is of the utmost importance. The sellers are not going to send you a silver platter containing their lowest acceptable price and their necessary time of departure. However, their response to your first offer will give you a lot of clues as to how desperate they are to sell. If they respond to your offer with virtually the same price as is on their listing, you may be in for a stalemate. However, if they make a significant effort to come down on their price, and better yet respond quickly to your offer, you have an idea of how much leverage you have.
DON’T show enthusiasm. Remember, leverage is the name of the game. Just like a smart seller won’t show that they are eager to sell, you shouldn’t show that you are eager to buy. Whenever possible, make them think that you are not that interested in this house. Tell them that you have other offers on the table. Give them as little time as possible to respond to your offer. Get in the driver’s seat of this negotiation from the get-go.
Homebuyers should keep their poker face on at all times.
DO know your numbers. Buying a house is an emotional decision, especially if you find something you really like. However, remember that you need to be in control, and you can’t do that from an emotion-driven negotiation. Before the real estate negotiation starts, know what your limits are, know the price you simply can’t go above due to your financial situation, no matter how much you fall in love with the home. Your agent should be the voice of reason once the negotiating heats up, settling you down when you start to get carried away.
DON’T be afraid to walk away. As stated above, you may get some sellers who are not in a rush, and this will be apparent after their first counter-offer. You may want to counter once more, but if they’re not budging, don’t waste your time. Often times, if you pull out of negotiations, you’ll find something better soon. There are always homes popping up on the market and it’s not worth your time and energy to battle with a stubborn seller. Use your BATNA (the Best Alternative to a Negotiated Agreement) in buying your Chicago Home. Delphine holds two Certified Negotiation Expert (CNE®) certifications with Real Estate Negotiation Institute and has years of experience in helping buyers successfully negotiate their real estate contracts. If you are looking to purchase a home in the Chicago area, contact her to have her represent you and help you negotiate against the seller.
Use your BATNA (the Best Alternative to a Negotiated Agreement) when needed.
DO use a little creativity. Earlier, we mentioned the many elements of an offer. Don’t be afraid to use those as opposed to or in addition to the sales price. Seller won’t budge on the price? Try asking for help on the closing costs or keeping some of their nice furniture. You can also negotiate on contingencies, length of contract or simply HOA fees paid by the sellers. Think outside the box in order to get a deal done.
Find out if your real estate agent has collaborative or aggressive negotiation skill will help you win because she/her represents you.
Real Estate Negotiation is one of the most important aspects of real estate and can be the difference between a good deal and bad deal, or in some cases between a deal and no deal at all. Make sure you have an agent you trust leading you through this process. Contact Delphine Nguyen of the Delphine Team with Baird and Warner to get you from looking to negotiating to buying in the quickest possible time frame, with the most money in your pocket.