How to Negotiate a House Price: 7 Negotiating Tips

Before you move into a new house and start building home equity, you should do your best to purchase that home at the most reasonable price. Buying a house is different than buying the average good or service—for one thing, the sale price of a house is negotiable and flexible. This means potential homeowners can do their own research and work alongside real estate professionals to ensure they do everything in their power to reduce the listed price of their new house to the best of their ability.

Keeping a few core factors in mind before you begin the home-buying process can help set you up for success. Here are just four things to consider:

1. 1. Comparable homes: Research on your own or work with a trained professional to ascertain the current market value of similar homes. The house you end up buying should be comparably priced, whether it’s your dream home or just a temporary abode.
2. 2. Finances: Knowing your bottom line financially can clear your head a lot before negotiating a new home purchase. By taking a realistic look at your finances, you’ll be able to tell how much wiggle room you have to go up if you’re in a seller’s market. On a more immediately pragmatic note, your overall finances also help determine your mortgage rate, too.
3. 3. Other bidders: The more bidders a house has, the more likely the initial house price will rise. Once a bidding war starts, the person with the better offer at the end of the process gets the house. Knowing how much competition you likely have enables you to make informed decisions about how high or low your initial offer should be.
4. 4. Timeline: Ideally, you should have plenty of time to go through the house price negotiation process. If you’re in the midst of foreclosure and need to relocate immediately, all the power is in the seller’s hands—they’re in a greater position of strength to negotiate. If possible, aim for a flexible closing date for home negotiation purposes.

Negotiation is all about approaching a situation strategically. Consider following these seven strategies when negotiating your way to homeownership:

1. 1. Assess housing market conditions. Do your best to discern whether the house you hope to purchase is in a buyer’s market or seller’s market. In the former case, odds are you’ll be able to negotiate more forcefully and can put a lower offer in initially—there are more houses than there are buyers, so sellers are more eager to make concessions to get homes off their hands. In the latter circumstance, there are more potential buyers than there are available houses, so sellers have more bargaining power. You might need to be ready to put more earnest money in escrow or start off with a higher down payment offer to stand out from your competitors.
2. 2. Be ready to haggle. If you’re in a buyer’s market, you can start with a lower initial offer price than the seller listed. But even if you’re in a seller’s market, you should still be ready to haggle to get to the best price for you. Always be ready with a counteroffer until you’re sure the seller won’t budge anymore. Keep your negotiation going until you sign on the dotted line and pay the closing costs on your new home—for that matter, try to negotiate those down, too.
3. 3. Consider contingencies. Keep in mind that unforeseen circumstances can change the whole game of home-buying, and improper preparation for these can leave you disappointed. For instance, if you don’t negotiate an appraisal contingency, you might sign a contract prior to the final appraisal and get stuck paying a higher price than necessary. Make sure to read the fine print of any offers from the seller—you shouldn’t relinquish any contingency rights except in very unusual circumstances.
4. 4. Get your mortgage loan ready. Prior to making an offer on a home, work with your bank or whichever mortgage lender you plan to use to provide proof of your home loan approval. This pre-approval letter will allow you to negotiate more strongly, as it proves you’ll be able to pay a mortgage for the house over which you’re haggling.
5. 5. Inspect the house. Work with the home seller to do a thorough home inspection before making any final offers. This helps you figure out if there are any necessary renovations required or issues with the house that the seller failed to disclose up front. Occasionally, you can insist the seller pay for these changes before they sell you the house, which knocks down your overall costs.
6. 6. Negotiate within reason. While the seller expects you to haggle, avoid making lowball offers so small that they feel you’re wasting their time. Similarly, don’t go in with a higher offer than you can afford. As a general rule, come in about ten percent or so lower than the asking price. Sometimes, you can go lower (in particularly lucrative buyers’ markets), and other times you’ll need to start higher (in especially competitive sellers’ markets).
7. 7. Work with a real estate agent. Especially for first-time homebuyers, working with a realtor can be beneficial in helping you obtain a lower price than you likely could on your own. These professionals know the real estate market well, so they can help you understand property taxes, interest rates, and more. They also will do what they can to negotiate the minutiae of your purchase contract to the best terms possible for you.

All you need is a MasterClass Annual Membership and our exclusive video lessons from prolific entrepreneur Robert Reffkin, the founder and CEO of the real estate technology company Compass. With Robert’s help, you’ll learn all about the intricacies of buying a home, from securing a mortgage to hiring an agent to tips for putting your own place on the market.