7 Tips for Homebuyer About Negotiation Strategy

Negotiation strategy is different from negotiation style. From pit bull to diplomat, each of us has a personal style. But the strategy for negotiating the purchase of a home is based on facts: the real estate market at the moment of your attempt to purchase, the seller's requirements and the property itself (condition, amenities and comparative value in relation to other sold or listed properties).

The best real estate agents have tremendous expertise when it comes to market value in particular areas. In many instances, the most experienced agents have seen just about all the homes that have come on the market over the years. They also work with other agents and speak the same language. For buyers, that is the primary reason to work with an agent: They have the information and background to engage knowledgably in what can be a very intense, fast process.

Now, does that mean you can't undertake your own negotiation? Absolutely not. In fact, many buyers do. It means:

• Doing intensive research about the market, the property you want to buy and the seller's situation.
• Figuring out an appropriate negotiating strategy and style based on that information.

1. Setting strategy

The local market's condition is the single-most important factor in negotiation strategy. And just like the weather, the landscape is a crazy quilt of micro-climates. Markets vary from place to place and neighborhood to neighborhood. The first thing you need to know is what kind of market you are in: a buyer's market; a seller's market, a balanced market or a market where red-hot bidding wars ensue.

2. Negotiating in a buyer's market

You have more leverage in a buyers' market than any other market type because there are more homes for sale than buyers to make offers. For sellers, especially those who have to move for whatever reason, this is the most nerve-wracking market. Properties take longer to sell, so sellers are less likely to allow potential buyers to slip their grasp. They may hate your demands, but they need to sell, so you can assume control of the negotiation.

3. Buyer's market strategy: Ask for the moon

• Negotiate the home price. Make an offer at least 10 percent under the price you want to end up paying.
• Ask for seller-financed closing costs and a closing time convenient for you.
• You want all the appliances and the entertainment center? Ask for them.
• You'd really like the gas grill and flower pots on the deck? Go for it.

Buyer's tip: You're most likely to win concessions and personal property in a buyers' market.

4. Negotiating in a seller's market

Pit bulls beware. In a sellers' market, buyers don't have much clout, and style matters. If the seller has a desirable home and doesn't like your offer, he won't invest time in negotiating with you. In a sellers' market, a good strategy is to make a straightforward, “clean” offer.

Buyers cannot procrastinate once they've found a home they want. Any agent worth his commission will urge you to make a quick decision, perhaps drawing up an offer the same day you tour the property.

5. Sellers’ market strategy: Keep it simple

• Getting pre-approved for a loan is an essential first step in any market.
• Offer the asking price or close to it.
• Ask only for the standard contingencies — financing, appraisal and inspection — to protect yourself.
• Expect the seller to set the closing date to his advantage.
• Don't expect to receive the personal property you want. (But if the seller is planning a garage sale, you may be able to work a deal ahead of time.)

Buyer's tip:Forget the wrangling and go for the house. You'll feel lucky to get it.

6. Negotiating in a balanced market

A balanced market feels less like a pressure cooker because there is a more equal supply of homes and buyers. Because neither side is feeling market urgency, personal priorities reign. Expect the back-and-forth counteroffer phase to take longer than it does in either a buyers' or sellers' market. After several rounds of paperwork, buyer and seller might agree to do a 50-50 split of their differences on price, terms and personal property.

7. Balanced market strategy: Split your differences

• Offer less than the asking price.
• Include the standard financing and inspection contingencies.
• Offer terms beneficial to you.
• Ask for whatever personal property you want

Buyer's tip: Both buyer and seller are likely to feel good about the transaction. They will each gain and give up something in the spirit of compromise during the negotiation.
Source: Zillow.com