Calling All Bargain Hunters: 4 Items That Are Always Negotiable When Buying a Home
By Kimberly Dawen Neumann
Whether you’re a homebuyer or a home seller, you’ll end up a home negotiator at some point in the process.
The transactional nature of real estate exchanges means there will always be things both parties want—and even need—to bargain for to close the deal. But as a buyer, you might wonder if you can still negotiate in a seller’s market.
“Even in a highly competitive market, it is still OK to ask for things when buying a home,” says Nicole Beauchamp, a global real estate adviser and associate broker with Engels & Volkers. “Understanding what elements are negotiable is key.”
So, what are those elements? Well, almost everything is potentially negotiable in real estate. One agent we interviewed mentioned that someone even tried to get a buyer to take her horse as part of the deal. (The buyer passed.) But we’re not horsing around! Here are four of the most common things you can negotiate when buying a home.
1. The price of the house
While this might seem apparent, no article on real estate negotiating would be complete without stating that the price of a home sale is ultimately subjective. And the ultimate selling price a buyer and seller agree on is predicated on supply and demand.
“Home price is negotiable,” says Danielle Hale, chief economist for Realtor.com®. “Your local agent is a good guide. If homes are selling quickly, that’s a sign there may not be much wiggle room. But when a home spends more time on the market, you’ll have more room to negotiate.”
2. Earnest money deposit
An earnest money deposit is the good-faith deposit that accompanies a buyer’s offer. And if homebuyers walk away from an accepted offer without good reason, they forfeit their deposit.
“To strengthen their offer, some homebuyers will increase the amount of their deposit, to show the seller they mean business,” says Jason Gelios, a real estate agent with Community Choice Realty in Southeast Michigan. “For example, a purchase agreement will state an offer price of $100,000, with the buyer offering a $1,000 earnest money deposit as their skin in the game.”
Earnest money is different from a down payment, which is money strictly applied toward the mortgage. Earnest money is a deposit that later credits the buyer at closing and is not an additional fee.
Negotiating the amount of the earnest money deposit a homebuyer is willing to add to the offer is a bargaining tactic worth trying.
3. “Money” back at closing
“Money” back at closing can be a little tricky to understand.
But simply put, it’s a way for the buyer to end up with a little more liquid cash in the homebuying process by getting help from sellers to offset the costs of closing. You don’t actually walk away with cash from the seller, but you do get funds from the seller that can mean you end up with a little more cash left in your pocket.
Hale offers the following example to help explain this negotiation technique.
Let’s say you see a home that you want that’s $500,000. If you want to put a 20% down payment ($100,000) and have 5% for closing costs ($25,000), you’ll need $125,000 in cash. If you had $145,000 in your savings account, you’d have $20,000 left after closing on the home.
But if buyers wanted even more cash left over for emergencies and living expenses, they could offer to pay $510,000 for the house—and then ask for $10,000 back in cash.
The scenario would raise the down payment and closing costs slightly (to $127,500). Still, if the seller agrees and the home appraises at the higher price, you would have an extra $10,000 for closing costs. And you’d have $27,500 left over after the purchase instead of the $20,000 left over in the original scenario.
“In that example, a home seller still nets the same amount—they walk away with $500,000,” says Hale. “And the extra cash funds helps you, as a buyer, get more money upfront to use now, which can help since it takes a good bit of cash to buy a home even when you’re financing it.”
4. Mortgage rate and closing costs
This negotiation will likely happen between you and a mortgage broker. And it can significantly affect your ability to purchase a home.
“When a homebuyer is looking to get approved with a lender, they should be asking the right questions,” says Gelios. “Such as why they were offered the specific rate to how much the closing costs are.”
Different lenders could offer not only other program options but also different rates for the same programs. So always talk to at least two lenders to get a second opinion and to negotiate their best rate.
In some cases, Gelios says, a buyer could get some of the closing costs paid by the seller—called concessions—which is another negotiation that could happen in this area. However, that’s more likely in a buyers’ market.