Buying real estate is more formal than bargaining for a car. It involves written proposals exchanged between your real estate agent and the seller’s agent. When you decide to make an offer, “how much” is a decision you may want to make in conjunction with your agent.
A good real estate agent will conduct a Comparative Market Analysis (CMA) and help you negotiate, backed with knowledge of the true market value of the home you want to buy. Remember it is always important to understand how much house you can afford before committing to a price.
Here are some tips and tactics for making an offer on a house. Discuss these with your real estate agent.
Show that you’re serious.
From the seller’s point of view, a pre-approved buyer is more attractive than someone who says they can buy a house but have nothing but their word to back up their offer. A pre-approval can help you negotiate on price and it can be a deciding factor for sellers who receive multiple bids.
Put some skin in the game.
“Earnest money” is a deposit on the house you want to purchase. It minimizes the risk that the seller will sell to another buyer – or take the house off the market — while your offer is pending.
Leave room to negotiate.
Don’t call your first offer your “best” or “final” offer if you’re willing to go higher. In a competitive market, you can put an escalation clause in your offer, agreeing to go a small amount above the highest bid – but before you do, decide on the maximum amount you’re willing raise your offer.
Lowball with caution.
Bidding low may be a good strategy in a weak market, but if your bid is too low, the seller may be offended and reject your offer without even trying to meet you in the middle. If you want to make an offer that’s significantly below the asking price, explain why in specific but polite terms.
Time on the market matters.
If a house has been on the market for only a few days, the seller is less likely to give you a price break than if the house has been sitting for weeks or months. The reason WHY the seller is selling can provide a clue regarding the seller’s willingness to wheel and deal.
Make it easier for the seller.
For example, if you can agree to set up your housing inspection quickly – and to take responsibility for small repairs that may come to light – your offer will be more attractive than a competing offer that requires the seller to take care of all pre-closing repairs.
Remember: Sellers are people, too.
Sellers are often attached to their homes and want to leave them in good hands. An offer letter that explains why you want the house – for example, to live closer to an elderly relative or to raise your family – can sometimes make a difference.