8 Negotiating Techniques for Home Buyers
You have been searching and searching for the perfect new home, and you have finally found it. You are ready to put in an offer! As a home buyer in the St. Louis area, you want to make sure you present a strong offer that sets you apart from the competition, particularly in a seller’s market. You might be surprised to know that sellers do not always choose which offer to accept solely based on the price you are willing to pay. There are many factors that often go into their final decision. Understanding what these may be and what you can do as a buyer to give yourself the best chances of getting your offer accepted is an important part of the home buying process. These 8 negotiating techniques for St. Louis home buyers will help you set yourself apart when it comes time to put in an offer.
1. Know Your Finances
Knowing your bottom line financially can really clear your head a lot before you begin negotiating on a new home purchase. It is imperative to be 100% realistic about your finances so you will know upfront how much wiggle room you have to go up in price on an offer particularly when you are in a seller’s market.
When you consider buying a home in the St. Louis area, we recommend you start by sitting down with a lender to communicate what price point you want to be at, find out what the interest rates are looking like, and learn how much of a down payment will be required. Your choice of lender is more important than many home buyers realize. We highly recommend speaking with local lenders who have a reputation for excellent service and on-time closing. Using a reputable, respected, and well-known lending institution is definitely something a seller will notice when you submit your pre-approval letter with your offer.
2. Hire a Real Estate Professional
Many people think of a real estate professional as someone to help them find their perfect home with as few missing “must-haves'' as possible. But a REALTOR® is so much more! Real estate agents work as your advocate in every part of the home-buying process. They know the local market and have professional knowledge on how to navigate it based on current conditions.
Remember, as a buyer you probably have a very firm idea in mind of your must-haves and must-not-have factors in your new home; therefore, it is important to communicate these factors with the agent you hire, because an experienced REALTOR® is trained to not only find the perfect home you are looking for, they have also been trained to negotiate well for their clients. An experienced agent will have tried and true techniques that work and they will do whatever they can to get you into the home of your dreams. You should look for real estate professionals who have proven success in your market and a reputation for excellence.
To find the perfect agent for your needs it’s important to interview REALTORS® in your local area. Word of mouth is also a great way to find a reputable real estate agent in your area, so ask your friends and co-workers if they know an agent that they have had a positive experience with.
3. Conduct Research
Be sure to do your research. Compare sale prices for homes that interest you. You can check public records online and gather as much information to determine confidently where and what you are waiting to purchase. Doing this research in advance can help you choose what to pursue or back away from in a listing. Your real estate agent can be a huge help in this area because they are local area experts and can help you understand and interpret any data you may find.
4. Be Personal
Most buyers in today's market write letters to the sellers to express their interest in the home. Quite often they include a family photo or two and describe to the sellers what they love about the house and why they would love to be the new homeowners. The letter should be heartwarming but not over the top giving the impression of desperation. It’s just really a nice touch to put a human face to an offer. Many may think real estate is all about numbers and expediency, but real estate is a relationship-building business as well.
Many times sellers have expressed a deep desire to sell their home to a family that will love their home as much as they have. Often sellers are leaving their first home or the one they raised their family in and it is the root of many happy memories. Therefore, it is important that the seller feel a connection to you through the sincerity of your letter. It helps make the seller feel that you truly ARE the PERFECT buyer. To do this you could:
- Include the names and ages of your children (if applicable)
- Add some history about your prior home and how it relates to this home
- Your occupation, education, and struggles to get where you are in life
- Explain why YOU deserve to live in this home and how well you will care for it
- List the specific reasons why you fell in love with this home
This is not a required part of making an offer on a home but many buyers choose to do this, especially in a seller's market where you are likely to run into a lot of competition from other buyers.
5. Bring Your Best Offer First
In a highly competitive environment, such as a seller's market, bidding wars are very common, but it’s truly not all about the price. Increasing purchase prices with escalation clauses may be common, but there are other ways to stand out and get your offer accepted. Adding, removing, or modifying contingencies can be a creative way to separate yourself from the masses. You can add a larger earnest money down payment, entice the seller with a quick closing date, or offer a flexible closing date if the sellers are also in the market to purchase.
Although most lenders don’t require home inspections, such as termite, radon, water, septic, etc, the importance of these inspections should not be dismissed as the inspections allow the revealing of a great deal about the home. Discovering there is a foundation crack, mold, or a leaky roof often gives the buyer the ability to negotiate terms since these items would have to be remedied eventually. Even if you do not intend to ask the seller to make any repairs, performing inspections is still highly recommended so that you can make an informed decision. If the market is highly competitive, you can have your real estate agent write into an offer to purchase the ability to have an inspection without the intention to ask for repairs. As an alternative to waiving inspections, you may want to consider purchasing a home warranty that is affordable and delivers extensive coverage.
You should discuss with your real estate professional what other contingencies might be considered to keep your offer competitive. Do not hold back on what you think will be your best offer. Present this first. Not presenting your best offer first may mean that the seller skips right over your offer and signs with another buyer.
6. Keep Offers Tight
First and foremost, determine how far you are willing to stretch your dollars. You should have a deep understanding of what the current market conditions are so you know how much to offer. In a seller’s market, you probably will not get away with offering below the seller's asking price, and may even need to offer higher in order to win the bid. In other markets, you might be able to offer less. Your real estate agent will have a strong understanding of the current market and can help you decide what gives you the best chance. In the current housing environment, there are many more offers than available homes. A low offer can often offend the seller.
7. Write a Clean Offer
It’s also imperative that you write a clean offer. This means you don’t leave out ANY essential elements or give the seller any reason to write a counter offer. Your goal is to make your written contract a no-brainer for the seller to sign the offer the way you wrote it. This can be achieved by following these steps:
- Verify the address is correct
- Add up the earnest money deposit, loan amounts, and balance of the down payment to make sure the numbers equal the sale price
- Check the closing date and possession terms
- Discuss motivations for changing the contract default periods
- Review seller and buyer paid items and determine whether these items are red flags for you
- Review how much time are you giving the seller to respond and who needs to receive the response to designate acceptance
Also, don’t let small items become big issues. For example, it is customary for a buyer to pay title and escrow fees. These can be relatively small amounts and might be something that you avoid asking the seller to pay, as it can make your offer unattractive, particularly if they have several other offers that do not ask for these items.
8. Know When to Walk Away
This is a very important aspect of home buying. Be level-headed, reasonable, and neutral. Buying a home can become very emotional so this can be tough. Set a budget for your home purchase and stick to it. Try to NOT get emotional and move on to the next property, if it becomes necessary. Certain sellers can be unreasonable, but their overpriced listings will likely sit on the market longer. Great homes that are competitively priced can (and most likely will) draw multiple offers in any market, and in a seller’s market, they definitely will. Don’t let this market trend propel you to go beyond your budget or agree to concessions (such as waiving an inspection) when it’s just not in your best interest to do so.
Knowing how to make the best, most attractive offer on a home for sale means knowing and understanding the market, what competition you might face, and more. Having a real estate professional in your corner when it comes time to make an offer on a home means you will have an expert on your side, who can guide you through the entire process step-by-step and make sure you are writing the strongest offer with the best terms possible for your situation.
Our team is hard at work securing contracts for our buyers, even in strong sellers' markets. How can we help you find your next home? What questions fo do you have about the home buying process? Contact us or fill out the form below with any questions or needs you may have and we will be happy to help you with all things real estate so you don't have to navigate the process alone!