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How to Negotiate the Best Real Estate Deal

How to Negotiate the Best Deal

Whether you're looking to buy or sell a house, you want success in the real estate marketplace. What are the steps you should know to come out ahead?

It begins with negotiation. Both sides want the outcome in their favor, and it’s rare for both buyers and sellers to get everything they want. You have to develop a strong bargaining position to get the most out of a transaction involving real estate for sale.

Here are five fundamental factors that determine which side will win in the negotiating.

1. The Real Estate Market

Sometimes the economy is in a buyer’s market, and sometimes it’s a seller’s market. You want to try to time your purchase or sale of a home to coincide with market timing that favors your current position.

Of course, it’s still possible to succeed against the prevailing trends with greater leverage than you’d expect based on the marketplace. As an example, there might be just a few homes for sale in a desirable neighborhood, so that would favor you as a seller in that scenario. Alternatively, a buyer who has cash and can quickly close a deal might still get a better deal in a situation where a seller needs to sell the house quickly.

2. The Bargaining Power

Having bargaining power or leverage means you know something that puts the odds in your favor of getting a better deal. If you know the seller is desperate, you can be more aggressive in negotiations. In another example, there might be a seller who knows that you’re one of several interested buyers, which means if you push too hard in the negotiations, the seller can just pass and pick someone else’s offer with a higher price and better terms.

3. The Details

Transaction prices matter, but there’s more at stake than just that.

Think about two hypothetical identical properties that sell at the same time for the price of $200,000. Even with the same price on the same houses for sale, the deals aren’t necessarily identical. One owner could have agreed to paint and purchase new kitchen appliances, plus pay closing costs, while the other owner didn’t make any concessions.

This means that the first house was actually sold at a discount compared to the second house, when you consider the monetary value of all the extras from the first owner. This is the deal you’re looking for as a buyer, while a seller would rather be the second owner and give up no concessions.

4. The Financing

Real estate transactions are all about an exchange of houses for money. Here are factors that impact the money issue:

  • It helps both parties for a buyer to be pre-qualified or pre-approved by a lender. Sellers like it because they know the buyer will actually be able to support an offer, and buyers like it because it helps them gauge what their true price range is.
  • With a lower interest rate, the pool of potential buyers increases, and more buyers means greater potential demand, which is great for sellers. If interest rates are high rising rates, there will be fewer buyers in the marketplace.
  • Today, those who have good credit can find loans that ask for just 5 percent down or less. Even 100 percent financing mortgages are now available from conventional lenders, which is good news for buyers and sellers alike.

5. The Expertise

Sellers with homes for sale often use brokers for representation, and they have an advantage if the buyer has no representation and little expertise. Having a better broker compared to the other party is a big boon at the bargaining table.