6 Smart Negotiating Tips for Home Buyers
Getting the best deal on a home depends on smart negotiation. Use these six strategies to buy your dream home for less – even in a highly competitive seller’s market.
1. Eliminate Contingencies
It’s common to make an offer contingent on being able to sell your existing home. If you can remove that contingency, that’s one less thing for the seller to worry about. With multiple offers on the table, this might be enough to tip the scales in your favor. But you must exercise caution. Make sure that your financial situation can actually absorb the extra payments if your home takes longer to sell than expected.
2. Offer More Earnest Money
Earnest money works essentially like a deposit. Putting down a higher amount shows the seller that you’re serious, simply because you have more to lose if you back out of the offer. Once the deal goes through, the amount of earnest money ultimately won’t make any difference. But it shows that you’re serious about buying the property.
3. Include an Escalation Clause
With an escalation clause, you’re essentially offering to buy the house at a specific price or “escalate” it above other offers by a certain amount. For example, if you offer $350,000 with a $2,000 escalation, and someone else offers $370,000, then your offer would automatically “escalate” to $372,000. For your own protection, be sure to ask for proof of the competing offer. Also include a cap, or upper limit you’re willing to pay, to keep escalation from spiraling out of control. Keep in mind that an escalation clause can put you at a disadvantage. The seller will know exactly how high you’re willing to go, and may try to negotiate upward.
4. Shorten the Expiration Date
Consider putting a shorter-than- normal expiration date on your offer. This may force the seller to take your offer immediately, rather than waiting around for something better. But think carefully before employing this tactic. In a hot market, the seller will have all the leverage, and a short expiration date could backfire on you.
5. Pay Cash
If you can pay cash for the home, that may be enough to move your offer to the top of the pile, even if the dollar amount is slightly less than other offers. Experienced sellers know that financing issues can spring up at the last moment, complicating the closing or even ruining a deal. So a cash offer is more desirable. Failing that, at least provide a pre-approval letter showing that you’re in a strong financial position and can close on the house without a problem.
6. Make It Easier to Move Out
Simultaneously selling a home and buying another one can be complicated. The seller may dread the idea of moving into temporary housing while they get their new home lined up. Offer to let the seller stay in the house for a month or two after the sale. You can rent the house back to them until they’re ready to move. To sweeten the deal, you could even offer to pay their moving expenses. Financially, that’s a tiny percentage of the total cost of the home, but it might be enough incentive to get your offer