These days, homebuyers have the upper hand in real estate transactions. But don't expect sellers to accept just any offer. When negotiating a home purchase, you still need to do your homework and determine a fair market value for a property. And if you're savvy, you may be able to get some extras--such as a home warranty or cash for closing costs--included in the deal.
Here's some expert advice on how you can haggle like a pro.
Start by doing some market research. That will give you the background you need to kick off your negotiations.
"Given that we're in a buyer's market, buyers don't typically pay the asking price," says Bryant Roman, a real estate attorney in Brooklyn, New York. But that doesn't mean you can just go in and offer 10% to 15% below the asking price.
"In a buyer's market it may be tempting to come in with a very low first offer," he says. "While some sellers may respond, keep in mind that you do run the risk of offending the homeowner and having him refuse to even give you a counter offer."
Instead, Roman advises buyers to do a search of comparable sales--or "comps"--and find out what similar properties sold for in that neighborhood.
A buyer may also want to look at what's called the list-to-sales ratio. This figure tells you at what price a property was initially listed and the price at which it ultimately sold. A real estate agent can help you do this.
The next area for negotiation is items in the sales contract. Some of the details worth haggling over are the contingencies a buyer should insist make it into that document.
The first one is a contingency for an inspection. "If the property has a lot of damage and needs a lot of repairs, the buyer may not want to buy the home," Roman explains.
If the buyer still wants the home, despite the poor inspection, there are other strategies to consider. "You can always ask the seller to make the repairs," Roman says. "And if the seller doesn't want to get involved with the improvements, you can also ask him for a credit off the home's price."
Another important contingency gives the buyer an out if the appraisal comes in lower than the agreed-upon price. "Not only do you not want to pay more than a home is worth, you also may not be able to get a mortgage from a bank," says Roman.
As with the inspection contingency, you don't have to walk away from a property just because the appraisal comes in too low. Instead, you can ask for the seller to cut the price. So, for example, if the property appraisals finds that the home is valued $20,000 less than the price you agreed to pay, you can ask for a $20,000 reduction on the purchase price.
A third contingency you'll want to include is one that allows you to get out of the contract if you can't secure financing. Otherwise, you run the risk of losing the earnest money deposit you put down when you made your offer.
Given the current climate, there are even a few more things that are open to negotiation. One is who pays the closing costs. "In today's buyer's market, sellers are increasingly willing to pay a buyer's closing costs," Roman says.
Buyers may also be able to negotiate six months or even a year's worth of homeowners' association fees. And if you see home appointments that would be difficult or expensive to remove--like that flat screen TV mounted to the wall--perhaps the seller will make a deal for those too.
The bottom line is that today a buyer can ask for some concessions he wouldn't have gotten just a few years ago. So by the time you're done with the negotiations, you should feel confident you got the home you want at the right price--with some nice extras, too.