How to negotiate the best price for your future home

October 16, 2014

If you're unsure about the negotiation process, buying a home can be tricky. To help you get the best price for the home you're keen to purchase, here are some money-saving tips that are worth knowing.

How to negotiate the best price for your future home

You’ve fallen in love with that perfect brick house. It has a big backyard and great location next to restaurants, shopping and quality schools. You’re certain it’s worth every penny and are prepared to shell out the listed selling price to buy that home. Hold on. Before rushing your decision, consider the following tips on how to negotiate the best possible price.

Know your real estate agent

Get to know your real estate agent before you give them your business. After all, they'll be helping you make one of the biggest purchases of your life. Speak with more than one agent and remember to ask them:

  • How much experience do you have?
  • How accessible are you when I call or email?
  • Can you provide references?

An experienced real estate agent will happily provide references, be knowledgeable about the current market, and work on your behalf to get the best price possible for the home you want.

If he or she is reluctant to provide references, it's a red flag.

Get to know the seller

Understanding why the owner is selling will help determine how much you can negotiate.

  • Go to the open house and see what information you can dig up.
  • You also might casually speak with a neighbour to tell them you’re interested in the house.

If there's one thing to know, it's this:

  • A seller who is moving the family due to a new job or who has already put an offer down on another house will likely have more negotiating room than one who is just testing the waters.

Understand the market conditions

If you’re lucky enough to have a buyer’s market, it means there are more houses available than buyers.

  • In a buyer's market consider the final price you're willing to pay. Then offer around 10 per cent below that number.
  • You can ask the seller to pay closing costs or to leave any furniture or appliances you like.
  • Even though you may have the advantage, be prepared to make counter offers.

In a seller’s market, you will likely need to act quicker and offer closer to the asking price. A seller's market means there are more buyers than houses available.

  • If you start too low with your bid, the seller can simply ignore it and move on to the next person.

To strengthen your chances of success when competing for a home with another potential buyer:

  • It’s a good idea to be pre-approved for a loan and to have a down payment ready. That means a faster cash payment to the seller.

You can still protect yourself in a seller's market with the necessary inspection contingencies outlined in the sales contract.

Compare prices and historical info

It's important for your realtor to work and gather prices for homes that have recently sold in the area. Why? These comparable listings will give you negotiating power. For example:

  • You might find a house down the street with the same square footage and number of bathrooms sold for $15,000 less. Perhaps it was because the roof needed repair; maybe the kitchen and bathrooms were outdated; it could be the hot water heater was ancient, inefficient and will need to be replaced for a few thousand dollars. There could be lots of reasons.

Having the historical buy-sell information of nearby houses and the house you're interested in gives you a real advantage when it comes to determining the true worth of a house and what you want to offer for it.

Get a professional home inspection

Since you're probably about to make the biggest financial decision of your life, it's a good idea to know if the home you're interested in purchasing is in good condition. What's more, it can be an excellent way to reduce the final price of the house and could work to your advantage.

  • If a home inspection has already been done, make sure you receive a certified copy and that it comes from a reputable inspector. If there isn't any, invest in a good home inspection for the property.

A thorough home inspection will potentially reveal problems with the house that will need to be fixed immediately or down the road. They include such things as:

  • Cracks in the foundation that could suggest structural problems with the building.
  • Old, inefficient and rotten windows that need replacement.
  • Stains on the wooden rafters in the attic, hinting at a leak that might need fixing.
  • An electrical panel in the basement that has reached its capacity and needs to be upgraded.
  • Old electrical wiring in the walls that are a hazard.
  • A faulty basement sump pump that puts you at risk for flooding in springtime.
  • Soggy sheetrock and the presence of mould pointing to the possibility of excessive humidity.
  • Sinks that drain very slowly, which could be a sign of clogged pipes.

If there are problems, you'll want to determine how much renovations or repairs would cost.

  • Get several estimates for the work from certified renovation contractors.
  • It's important to call upon experienced, licensed contractors to give their estimates credibility.

These estimates are a good bargaining chip and could be used to your advantage when determining the final price you're willing to pay.

  • With estimates in hand, you can negotiate (within reason) to pay a much-reduced amount on the home to compensate for any major repairs or renovations that must be done right away or in the next few years. The result? You could wind up saving a bundle.

When negotiating the best price for your house, always do your homework, ask a lot of questions and find a real estate agent who will work for you. Also, get a home inspection and don't hesitate to ask for a reduction in price if some major flaws are discovered. Since buying a house is one of the biggest purchases you'll likely make in your lifetime, you want to make sure it's done right from the start to help you get the most value for your money.

The material on this website is provided for entertainment, informational and educational purposes only and should never act as a substitute to the advice of an applicable professional. Use of this website is subject to our terms of use and privacy policy.
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