Negotiating with the Seller

You've done your research, and decided that home ownership is right for you. You've thought long and hard about what type of house would be best for your family's needs, and calculated how well your budget can accommodate the costs associated with owning a home. You've saved enough for a reasonable down payment. And you've found a house that looks very appealing.

Now it's time to begin negotiating with the seller in order to save yourself some money. Don't be afraid to drive a hard bargain, especially in today's buyer's market. Buying a home is probably the biggest investment that you'll make in your life, so don't worry about appearing overly nice or agreeable (although there's certainly no need to be ugly), and don't let your emotions about the house cloud your good judgment.

First, as always, make sure that you've done your homework. Before you can make a reasonable bid, you need to know if the price that the owner's asking is in line with those of similar homes in the area. Check with several real estate agents and a neighbor or two. Peruse the real estate listings of the local newspaper for several weeks to get a good feel for home prices in that neighborhood. And by all means, determine if the local market is up or down, and how quickly houses on the market have been selling (or not selling).

Additionally, learn all that you can about the seller. Again, inquiring with neighbors can turn up valuable information, as can listening to what the seller himself has to say about his or her situation. Someone else's misfortune or circumstance may be your best bargaining tool and a prime avenue for saving money (but that's not to suggest that you should purposely attempt to take advantage of anyone). For instance, someone who's just been through a divorce and is in financial difficulty will likely be more anxious to sell at a discount. Heirs who've inherited a home that they don't need or want, people who've already bought another house and are stuck making two mortgage payments, and employees who are being transferred and need to move quickly are also candidates for selling their home to you at a great price. But don't limit your choices; developers who may be in financial distress and need to unload inventory quickly in order to generate revenue can also be sources for great buys right now. So can banks that currently find their portfolios full of recently foreclosed mortgages.

You'll also want to learn as much as you can about the property itself before making an offer. If repairs are needed, be sure to factor their costs into your bid. If you're handy, you may be able to save thousands of dollars more by fixing relatively minor problems yourself. Things like broken windows, old fixtures, and worn-out rugs don't cost much to correct. However, complicated and expensive repairs are another matter altogether. A wet basement, a buckled or cracked foundation, or inadequate plumbing are warning signs to be avoided.

A general rule of thumb when making an offer on a good, solid home that's reasonably priced is to begin negotiations at eight- to twelve percent below the seller's asking amount. An offer of five percent below the asking price doesn't leave much room for bargaining, while twenty percent below might be viewed as insulting by the owner and summarily rejected. On the other hand, you must weigh the market and the seller's reasons for selling. Right now, sellers are looking for buyers, so negotiate with firmness.