Negotiating Price On A Home Purchase
Negotiating price on a home purchase. Hello, I wanted to do a video about negotiating price when you’re buying a home. This would even apply to if you are under contract on a home and your appraisal comes in low. And you’re trying to renegotiate the price, if you have an appraisal contingency to do so. So what I wanted to discuss is a lot of people when you’re negotiating price or renegotiating price, focus on the dollars.
Let’s take, to use a round number, a $500,000 home. Let’s say that’s the asking price, $500,000. Now, obviously there’s going to be some different things that play into what you want to offer. How long has the property been on the market? If it’s been on the market for a month or two with no price adjustments, that might mean it’s overpriced. How much do you love it? How much does it fit your needs and wants? What’s it mean for your commute? Does it have the exact number of bedrooms needed? Is it in a neighborhood where maybe you know people and you really want to be? There’s a lot of different variables that impact what you think you want to offer. But what I want to focus on is the negotiation. Let’s say for example, you offer $475,000 on a $500,000 asking price.
Let’s say the seller counters your offer at $495,000. That’s a pretty firm counter, they’re basically telling you. They are signaling, look, I want my purchase, I want my asking price or pretty close.
Let’s say you counter at $480,000. Let’s say they counter your counter at let’s say $490,000. And then maybe you say, “Well, I’m not willing to go there. My last counter-offer was my best offer”. So let’s say your last counter offer was, I think I said $485,000. Seller’s come down to $490,000. Nobody’s willing to budge. The $5,000 gap which based on the original asking price, we’re talking about an asset that’s worth almost $500,000, you’re talking about a 1% variance.
Offers can come down to a small percentage gap and still ruin the deal
So think about that. 1%. It just seems silly to me. And I think we all get, on both sides, the seller and the buyer, can get really arbitrary. And it becomes a challenge. It becomes a mental block. It becomes a lot of things that really. It’s just silly. One percentage point, really? This house that you wouldn’t be making an offer if you didn’t really want it, we’re really going to let 1% ruin the deal and everybody’s going to go home and void the deal and move on for 1%? Who comes the rest of the way in this discussion? Does the seller come down to the 485? Does the buyer come up to the 490?
Who throws in the towel for the 1%?
I just think it’s a really interesting discussion. Should we split the difference, yet again? Should the buyer counter 487.5, and you’ve split that last $5,000? The point of the whole video is to really think about why you’re in the negotiation in the first place, both the seller and the buyer. Sellers, your house is on the market, and you’re selling it for a point. You need to sell it. And you want to sell it. Most likely you need the money for something else. You’re really gonna let 1% or maybe a half of 1% ruin the deal? Maybe you counter the last counter offer and you’re the one that comes down to 487,500.
Or I could use that same logic with the buyer. We’re really going to let this go over 1% or a half of 1%? This is a home you’re going to live in for whatever, five years, 10 years, or maybe you’re going to live in it for five, seven, eight years, move out of it, but keep it as a rental property? So now you may own this asset for 10, 20, 30 years. You’re going to look back some day and think, “I almost walked away from this for 1% or half of 1%?” So if you want it, go get it. Offer a little more, don’t be arbitrary. Don’t be obstinate. And don’t cut off your nose to spite your face.
Buyers market versus sellers market – Negotiating Price On A Home Purchase
Throw out whatever cliche you wanna throw out. I just think that I’ve seen this happen so many times, I wanted to do a video on it. And hopefully this gives people some counsel and some thought. And we break the logjam because I’ve seen it enough, usually in a market that is a down market, a buyer’s market, or a flat market. Now, in a booming market, in an aggressive market, in a seller’s market, you’re gonna… as a buyer, you have to pay what you have to pay. And this discussion doesn’t happen frequently at all. But if the markets shift, it becomes a flat market or a buyer’s market, usually price negotiation becomes a thing again.
Look at the percentages – Negotiating Price On A Home Purchase
And maybe that’s going to happen going forward here in 2022 going forward. And hopefully this video will help people think about this. I’m not advocating for just throw your money away on either side, buyer or seller. But just realize we’re talking about small percentage points, and it really would be wise not to let a deal go for a small percentage. Don’t look at the dollars. That’s $5000, that’s $10,000. Look at the percentages.
Thirsty in a desert
If we were on a desert hike and we lost our way and we were lost and we’re out of water. We’re out of supplies. And we come across a water stand and they’re selling bottled water that’s usually $1.00, but now they’re asking $1.01. A dollar and a penny. I don’t know why they would do that but…And you say, “No, no, I’m not gonna pay a one percentage point extra for that water. Because I can go back to the grocery store and get that bottled water for a dollar.” Come on, you’re crossing the desert, you’re thirsty, pay $1.01. It’s a silly analogy.
Conclusion – Negotiating Price On A Home Purchase
But it’s something that I want you to consider. How much do you like this house? How much does it fit your needs and wants? Should we just go a little bit further and close this teeny tiny gap and make it work? And hopefully the listing agent representing the seller is having the same conversation with the seller. To be fair to you as a buyer, hopefully everybody is realizing we shouldn’t let this deal fall apart for a small percentage. That’s my point. And hopefully, I’ve made it well. Let me know if you have any questions on this or any other mortgage questions.
Thanks very much.