I just thought you like to see this. After working with a couple who wants to buy a house for many months and after several un-successful bids on the homes, the husband finally wrote to me and asked me to tell him what is the best strategy to negotiate. So I wrote my response to him and I post it here. Some of the detail has been changed to protect their privacy.
Regarding the price negotiation, here are some of the tips that I have learned that will really help… This is based on many, many difficult experiences working with buyers who just refuse to accept reality and insist on giving unrealistic low ball offers.
1. Understand your market. Very few sellers are willing to sell below market. If you know the last sale in the area was for $650,000, trying to negotiate below that is unlikely. Even if the listing price is $599,000, that is just a way to attract more buyers to bid up the price. So the time you spent learning the market and the offers you made all serve a useful purpose – to help you understand the value. Other factors that would affect the real estate, such as interest rate, the number of properties for sale in the same area, as well as the condition of the property, all have an impact on the value. The most important thing is to study and learn the value so that you can protect yourself from making un-successful bids.
2. Look for property opposite to the popular taste. If you look for the best location and best condition home, expect everybody else is looking for the same thing. As a result, it is difficult to negotiate the price. Instead, look for “diamond-in-the-rough,” the place that may not be perfect. For example, instead of two bathrooms, look for home that has only one bath. Instead of brand new kitchen, the kitchen and bath needed to be updated. Find a place and use your imagination to see what it will look like if you put in some sweat equity. Anyone can pick up a can of paint to work on an interior wall over the weekend. If you are willing to work, the imperfect place can be a great deal.
3. Look for property that has been on the market for a while and still hasn’t reduced the price. This is not hard to understand. For example, Palo Alto homes are very popular, and they sell quickly. So if a house in Palo Alto has been on the market for over a month, it tells you that the asking price is too high. You can wait for it to drop the price, or better yet, make an offer and try to negotiate. I had many successful experiences negotiate the price down when the home had been on the market for over 4 to 6 weeks. Seller may not want to drop the price but secretly willing to negotiate. Seller’s logic never make too much sense to me but it is part of the human nature and we just had to learn to live with it.
It is important to understand that while trying to negotiate the best deal is important, timing of your buy is more crucial. With the interest rate being so low, the housing price is down, anything you buy, even at fully price, will turn out to be a good deal in the long run. Proper care for your home, location and patience will give you the best return in the house you own. Losing a good property because you want to negotiate extra $10,000 off from the seller will cause you more. This is just common sense.
I am happy to report that my client has just brought a house after my letter to them. If you have any questions concerning real estate market or the value of your home, you are welcome to send me an email at Ray@RaymondOng.com. I look forward to talking to you soon.