How to negotiate a home purchase
Quick insights
- Before negotiating a home price, research comparable homes in the area to understand fair pricing and strengthen your request.
- After the home inspection, use the results to negotiate repairs or request a price reduction if any issues are uncovered.
- Work with a real estate agent to craft an offer that includes key negotiation points, like contingencies or seller concessions, to give you more leverage during the process.
Purchasing your first home is exciting, but knowing how to negotiate can make the experience even more rewarding. It’s not just about getting a lower price—it’s about making a smart, informed decision. From understanding the market to knowing when to push for repairs or credits after a home inspection, smart negotiation can lead to savings. With the right information and a supportive real estate agent, even first-time homebuyers can feel confident during negotiations.
Understanding the basics of house price negotiation
House price negotiation involves buyers and sellers discussing the final sale price of a home. For buyers, this optional step in the homebuying journey can impact the terms of the mortgage.
Factors that affect how negotiable a home purchase can be
Several factors influence how much room there is for negotiation, such as:
- The current state of the house market (buyer’s vs. seller's market)
- How long the property has been listed
- The seller’s personal circumstances and urgency to sell
Homebuyers may see an opportunity to negotiate in several situations. For example, when a home has been on the market for an extended period, during a buyer’s market when inventory exceeds demand. Negotiations can be valuable for buyers looking to maximize their investment.
How to negotiate house prices
Making a reasonable initial offer is a key first step in the negotiation process. Here are several tips that could help in negotiating house prices:
- Research comparable sales: Review recent sales of similar homes in the area to understand the fair market value.
- Submit a formal offer: Work with your real estate agent to present an offer that reflects your research and includes any conditions, such as financing or inspection contingencies.
- Wait for the seller’s response: The seller can accept, reject or make a counteroffer.
- Negotiate terms: If the seller counters, evaluate their proposal and decide whether to accept, counter again or walk away.
- Leverage inspections: Use home inspection results to request repairs, credits or a price reduction if issues are found.
- Finalize the agreement: Once both parties agree on the price and terms, the offer becomes a binding contract pending final steps like the appraisal and loan approval.
Potential hurdles
Common negotiation challenges include bidding wars, stubborn sellers or unexpected issues uncovered during inspections. To navigate these, remain calm and flexible. Stick to your budget and know your walk-away point. If the seller is firm on the price, consider negotiating other terms, such as a quicker closing date or the inclusion of appliances. A skilled real estate agent can help you stay strategic and composed throughout the process, increasing your chances of a successful outcome.
Negotiating after a low appraisal
If an appraisal comes in lower than the agreed purchase price, it can create a financing gap—since loan providers won’t loan more than the appraised value. In this situation, you can:
- • Ask the seller to lower the price to match the home appraisal.
- • Negotiate a split, where both parties cover part of the difference.
- • Challenge the appraisal by submitting comparable sales data.
- • Walk away if your contract includes an appraisal contingency.
While a low appraisal can be frustrating, it also protects you from overpaying and opens the door for a new round of negotiation.
How to negotiate a counteroffer
When a seller receives your initial offer, they may respond with a counteroffer instead of accepting outright. Understanding different counteroffers can help you navigate the next steps strategically. Here are common ways a seller might counter your negotiation and how you might respond.
Higher sale price
- Example: You offer $350,000, but the seller counters with $365,000.
- How you might respond: You can meet in the middle, stand firm or increase your offer slightly if the home is worth it and fits your budget.
Change in closing date
- Example: You request a 30-day closing, but the seller wants 60 days to find their next home.
- How you might respond: If timing isn’t a dealbreaker, consider compromising or asking for a rent-back agreement.
Reduced or rejected seller-paid closing costs
- Example: You ask for $5,000 toward closing costs, but the seller agrees to only $2,000 or none at all.
- How you might respond: Evaluate whether you can cover the difference or ask for another concession, like a price reduction.
Modifying contingencies
- Example: The seller wants to shorten the inspection window from 10 days to 5 days.
- How you might respond: Consider whether the timeline is realistic for inspections and renegotiate if necessary.
Excluding items from the sale
- Example: You ask for the washer and dryer to stay, but the seller wants to take them.
- How you might respond: You can accept, offer to buy the items separately or push for other concessions.
Each counteroffer is an opportunity to reassess priorities, stay calm and find a solution that keeps the deal moving forward.
Reasons for negotiating a house price
Here are some common reasons why homebuyers may choose to negotiate:
- The home has been on the market for a long time.
- Comparable homes in the area are selling for less.
- The property requires repairs or updates.
- The appraisal value is lower than the asking price.
- The seller is motivated to move quickly.
- Market conditions favor buyers.
- There are multiple homes available that meet the buyer’s needs.
- Unfavorable inspection results reveal hidden issues.
In summary
Negotiating the price of a house can lead to significant savings and potentially better terms. A well-researched offer based on comparable home sales, the home’s condition and current market trends can open the door for a productive discussion. By doing your research, understanding the seller’s motivations and staying flexible, you position yourself for success.
Consider working with a real estate agent and Home Lending Advisor to help you navigate the exciting homebuying process with confidence.
