How To Negotiate House Prices as a Buyer | LowerMyBills (2024)

It’s easy to be overwhelmed by sticker shock when shopping for a home. With high demand pushing the median home sales price past $467,700 in 2022, negotiating with sellers to get a better deal may seem futile.

But aspiring homebuyers should know there’s more to negotiate beyond house price, and that being ready to haggle can save you money in the long run.

Why Negotiate?

The answer to why you should negotiate when buying a home is obvious: You save money if you can convince the seller to accept a lower price for their home.

But the price is just one aspect of the sale that can be negotiated. Real estate transactions are long and complex, and it can take a month or more from making a successful offer to closing the sale. During that time, you’re dealing with inspections, mortgage underwriting, the home appraisal, and more —the terms of which can be negotiated to save time or money.

For example, you can ask the seller to pay certain closing costs, to include appliances or furniture in the sale, or to adjust the closing or move-in date to fit your schedule. Just about every aspect of a home sale can be negotiated to make it work better for both you and the seller.

Preparing To Negotiate

Effective negotiation requires an understanding of the process and the market. If you make a strong argument backed by evidence, you’re more likely to sway sellers to your position.

It’s also important to avoid getting caught up in emotion while negotiating, says Chris McKenna, a Nashville, Tennessee-based Realtor.

“The biggest tip that I give my buyer clients before we put an offer in is to pick their ceiling before negotiations start,” McKenna says. “By establishing your highest number before negotiations begin, you are taking emotion out of the process and working with data and comparables supported by the market. If you don’t set these limits before the negotiating begins, you will bring emotion into it and could possibly overpay for a property.”

Evaluate the local market

One of the most important things to consider before negotiating house price is supply and demand in the local market. In a seller’s market, negotiating will be difficult — especially if you’re looking to secure a lower price. Negotiating price is easier in a buyer’s market where homes take longer to sell and might not go for their full asking price.

Know your comps

Looking at sales of nearby homes similar to the one you’re making an offer on is the most reliable way to know if there’s room to negotiate.

For example, if you’re interested in a three-bedroom, one-bath, 1,200-square-foot home that’s listed at $400,000, and a near-identical home in the same neighborhood sold a few weeks ago for $350,000, you may have room to negotiate.

Of course, many factors influence real estate values, so this system is imperfect. However, comps can provide reasonable insight into the value of a home.

Understand what you can afford

Before you start shopping for a home, it’s important to know how much house you can afford. If you can pay $3,000 per month for your mortgage at most, you’ll be unable to afford a home with a $4,000 mortgage payment.

Understanding what you can afford will help you know your limits while negotiating. It will give you a benchmark for knowing when you can afford your offer, and when to walk away from the negotiating table.

Find out where each side can be flexible

If you know where each side can be flexible in the homebuying process, you can find and negotiate aspects of the deal to the mutual benefit of both parties.

For example, if you have an extra month or two left on your lease, and the seller needs another month to move out, you can negotiate a later closing date or a rent-back period. That saves you a month of stretching your budget by making both rent and mortgage payments, and the seller the headache of moving multiple times in quick succession.

Enlist the help of a real estate agent

A real estate agent has professional experience and knowledge of the local market that can be invaluable when negotiating a home sale. Your agent can help you understand which negotiation tactics work and what you can negotiate during a real estate transaction. They also can handle the negotiations on your behalf to give you the best chance of achieving your goals.

Find out why the seller is moving

If you can find out why the seller is moving or looking to sell their home, that can help you negotiate a deal that works for both parties.

For example, if the seller has a new job across the country and needs to move next week, they likely will be more motivated to sell — and likely to accept a lower price —than a seller without an urgent need to move.

9 Tips for Negotiating a Home Price

If you’re looking to buy a home, use these tips to put yourself in the best position to negotiate the price.

1. Get an inspection ASAP

Many people include a home inspection contingency in their offer, which requires a satisfactory inspection of the home’s condition from a qualified professional. The sooner you can schedule the inspection, the better it will be for you. If the inspector identifies major problems with the home that make it unsafe or need expensive repairs, then you can use the inspection report to help you negotiate a lower price or to get the seller to pay to fix it up.

2. Ask the seller to pay closing costs

Real estate transactions involve paying closing costs that generally range between 2% and 5% of the purchase price. These costs include inspection and appraisal fees, property taxes, title insurance, and prepaid insurance or interest. Often, the buyer pays these costs, but who pays is open to negotiation. Some sellers who are hesitant to lower their price may be more willing to pay some closing costs to ensure a timely sale.

3. Offer earnest money

Earnest money is a deposit that the buyer makes with their offer to show their commitment to the purchase. The appeal for sellers is that if the buyer backs out of the deal for a reason not covered by a contingency agreed to in the purchase and sale agreement, the seller keeps the earnest money deposit.

You might get a slightly lower price for a home by offering a larger earnest money deposit to give the seller confidence that you will close on the transaction.

4. Add an escalation clause

A bid with an escalation clause includes the price the buyer is offering, plus a provision that can increase the amount to exceed any other offers the seller receives, up to a maximum amount.

For example, if you offer $250,000 for a home, you can include an escalation clause that will raise that offer to beat any competing offer by $1,000, up to a maximum of $300,000. The seller must provide proof of a bona fide offer higher than $250,000 to trigger the escalation.

This lets you offer a lower price while still giving you a chance to compete if the seller receives higher offers from other people.

However, not all sellers accept escalation clauses. You also give up some negotiating power by telling the seller the maximum you can pay for their home.

5. Make a larger down payment

In some cases, a larger down payment can help you when negotiating with a seller. The more you have available for a down payment, the less likely you are to encounter issues with getting a mortgage, and the more serious you appear as a homebuyer. Sellers who want assurance that the transaction will go through may find buyers offering a larger down payment more appealing.

6. Write a house offer letter

Writing a house offer letter lets you make an emotional appeal to the seller. For example, you might write a letter telling the seller a bit about who you are, why you want to buy their home, how you picture yourself or your family living in it, and why they ultimately should sell it to you.

However, many sellers don’t accept these letters because they may create legal problems, such as fair housing violations. Work with your real estate agent or Realtor to avoid writing anything that could put the sale in jeopardy.

7. Limit requests for contingencies

Real estate contingencies are conditions that must be met for the sale to close. Typically, they’re used to protect the buyer and seller from unforeseen circ*mstances.

For example, a financing contingency lets the buyer back out of a home purchase if they are unable to get a mortgage to buy the home with. Without such a contingency, a buyer who has to cancel the deal because they can’t get a home loan would forfeit their earnest money, and could face a lawsuit.

Buyers need to weigh the protections they get from contingencies against how much waiving them may improve their offer’s appeal for the seller.

8. Be flexible on dates

You’re likely eager to move into your new home, but a little flexibility and patience can help your offer appeal to a seller who needs more time to move out or find a new home.

Alternately, being able to close quickly could appeal to a seller who needs to move more quickly, perhaps to take a new job.

If you’re flexible where other potential buyers are firm, that may make your offer stronger.

9. Ask to include furniture or appliances

If you can’t get the seller to budge on the price of their home, you may be able to talk them into sweetening the deal in other ways.

Your purchase and sale agreement will outline what’s included with the home purchase. Ask the seller if they’d be willing to leave certain furniture or appliances behind. That can save you the cost of buying new furniture or appliances while relieving the seller of having to move or dispose of those items.

How To Deal With Counteroffers

After submitting an offer, you may receive a counteroffer from the seller. This can happen because yours was the only offer the seller received, or your offer might be just a bit off from what the seller wanted.

The important thing to figure out is how you’re going to deal with the counteroffer.

“Counteroffers will often happen when trying to negotiate a lower price,” says Klaus Gonche, a Fort Lauderdale, Florida-based real estate advisor. “The main tip for this is to have a predetermined line that you are not willing to pass. If the counteroffer falls somewhere between your original offer and that line, you will have a couple of options. You can accept the counter and move forward or send back another counteroffer. If it is beyond your predetermined line, you can either decide to walk away or give it another attempt by returning with another counter.”

You also could open up more involved negotiations, working with the seller to find a mutually agreeable middle ground. Consult your real estate agent or Realtor to decide which approach might be most effective.

How Much Can You Negotiate?

Negotiating home prices is more art than science. But even in a strong buyer’s market, there are limits to how much you can haggle over house prices.

For example, if a home is listed for $500,000, you can’t reasonably expect to buy it by making an offer for $250,000. You’d be lucky to even get a response.

Your ability to negotiate will depend on a few factors, including:

• Is it a buyer’s market or a seller’s market? You can negotiate more aggressively in a buyer’s market.
• How long has the home been on the market?
• How eager is the seller to complete the transaction?

In a buyer’s market, you may get lucky with an offer of 10% less than asking, but any lower is unlikely to produce results. In seller’s markets, you might have to go over the asking price to see results.

When To Walk Away

During negotiations, you always have the option to walk away from the deal. It can be hard to do, especially if you’ve invested time and effort in the negotiations. But sometimes it’s the best move to make.

The seller may be unwilling to discuss the price or agree to concessions that make the home a better deal for you. If this makes buying the home unaffordable, or you’re uncomfortable with the risks involved in buying on the seller’s terms, you may be better off walking away.

You could also find that your financial situation changes during the negotiation process. For example, if you’re stretching your budget to afford a home and mortgage rates rise, you might find that the home has become unaffordable, and you need to back out of the deal.

FAQ: Negotiating Home Price

Here are answers to some frequently asked questions about how to negotiate when buying a house.

The Bottom Line on Negotiating Home Prices as a Buyer

When you’re making any major purchase, it’s important to negotiate to put yourself in the best financial position possible. As a homebuyer, securing a lower price can help you save a lot of money. However, there are other things you can negotiate that may help you find creative, mutually beneficial solutions that could strengthen your offer.