Negotiating the purchase of a home is much different than most other forms of negotiation. Most people have experience buying cars, negotiating business deals and employment contracts, but those types of situations lack a very important component that is found in most real estate transactions – pride of ownership. Every seller is proud of their home and every seller thinks their home is worth more than their neighbors. Buyers who understand seller’s motivation and avoid the 7 biggest negotiating mistakes home buyers make will likely be able to negotiate more favorable deals.
# 1 Acting Competitively Instead of Collaboratively
Negotiation is the act of searching for common ground through a process of discussion and compromise. It’s purpose is to allow the parties to discover what really matters most to them and allow each to decide what is in each person’s best interest. The “Donald-style, tough guy” approach to home buying is rarely effective. In fact, this competitive “take-it-or-leave-it” tactic comes across as intimidation. In home buying, intimidation is a prescription for failure.
Instead, try a collaborative approach. Ask questions to explore what the seller really needs to accomplish to determine whether compromise is possible. Build trust by demonstrating a willingness to see the seller’s point of view. The way you approach a negotiation greatly affects what you get from that negotiation. The right attitude is critical to your success. Search for a win-win outcome and never be the last person to say “no.” Always give the seller the opportunity to say “yes” by accepting your last offer.
#2 Bashing the Property
From time to time we see buyers who want to tell the seller everything they dislike about their home. In their mind, when the seller is made aware of the property’s shortcomings, they will see how the property is only worth pennies on the dollar. Though this might work in other markets, it is rarely effective in our market. In fact, most sellers find this practice insulting and unless this buyer comes at them with a significantly better offer than the competition, they will work with another buyer. Unless your goal is to pay as much as possible for the property to overcome your insult, I wouldn’t suggest this approach.
#3 Sharing Confidential Info with the Seller’s Agent
Most home buyers share too much personal information with the wrong people. Knowledge enhances bargaining power. Never tell seller or the seller’s agent things like:
- How much down payment you have available
- The loan amount for which you have qualified
- How soon you must move
- You are willing to pay whatever it takes to get this home
- That you just received a big promotion with a substantial pay raise
The seller who knows this about you has gained leverage which can be used against you. It’s none of the seller’s business! Keep your affairs private unless that information is critical to getting the house you really want. One of the best reasons to work with a buyer’s agent is confidentiality.
#4 Using the Builder’s Agent when Buying New Construction
The agent “on-duty” at the model home represents the builder. They are paid to sell you one of the homes they have available for the most money possible, regardless what may be best for you. Upselling and steering is a common practice. The builder’s agent is not going to help you get a better deal or tell you about the builder’s reputation in the marketplace or what other builder’s have for sale that may be better suited for you or counsel you toward a well informed decision. There are many marketing tricks and gimmicks employed in the selling of new construction; an experienced buyer’s agent can provide insight that may be used to your advantage.
#5 Making Low Ball Offers
One of the fastest ways to alienate a seller and sabotage your purchase is to make ridiculously low ball offers. That is, offers that have no reasonable supportable facts on which to base the price. The seller will almost always feel that you are not a serious person and not worthy of doing business together. Of course, your goal is to obtain the most suitable home and buy it for the lowest price possible. Making a less than full price offer that is supported with facts is a much more effective way in which to find the seller’s lowest price. Then you can decide whether that price is right for you. In hot markets like Austin, low ball offers are a time-waster for everyone.
#6 Appearing Desperate
Curb your enthusiasm, control your emotions and rein back any display of urgency. Using a buyer’s agent provides a buffer protecting you from demonstrating excessive eagerness to get the property. The seller and the seller’s agent will use your drive to get the property against you. Psychologically you lose bargaining power and to some degree your ability to make a thoughtful decision. Buyers who appear desperate end up paying more than they could have.
#7 Disregarding Current Market Conditions
Understanding local market conditions and trends is an acutely important factor in determining a negotiation strategy. Getting and using reliable sales data is vital. The seller’s agent has no duty to provide you with that kind of information. In fact, a seller’s agent who may provide a buyer with information that undermines the seller’s listed price is breaching a fiduciary duty and could lose their license. Using the market forces to your advantage starts with knowing what’s going on.
Looking to Buy a Home in Austin?
Want to work with a team of Realtors who specialize in home buyers? Looking for a Realtor who isn’t afraid to negotiate and actually knows how? Someone who will protect your interests instead of simply trying to sell you the first house they show you? Check out our Austin Home Buyer Representation Program to learn more about our team of buyer’s agents. Then, call us at (512) 827-8323 or email us at info@11OaksRealty.com to schedule a no obligation consultation.