One Rule You Need to Know About Negotiating for a House
Ready to make an offer on the house you love?
If you don’t know one simple negotiating strategy for buying a home in Austin, you may give up your edge before the game has even started.
How can that be, you ask?
Why Your Home Purchase Offer is Weak
Want to buy a neat home like this gem in East Austin? You're going to pay too much if your offer is weak.
You forgot to sell your other house, first. You have to close on the sale of that one before you can close on the purchase of the new one.
In some markets, contingent offers – those that are contingent on the sale of another home – are standard. I can’t speak to the pros and cons of other real estate markets for buyers, so we’re just talking about the Austin real estate market.
When you make an offer to buy a home in Austin, you want your offer to be attractive to the seller so that the seller is more likely to accept. At the same time, you probably don’t want to pay full price.
When the seller is reviewing your offer with his agent, he’s going to see two negatives that jump out at him:
- Your offer is lower than the list price of the house.
and - You have to close on the sale of another home before you can close on your purchase of his.
One or the other of those has got to give.
If your house isn’t already under contract and through it’s option period, you’re asking the seller to have confidence that everything is going to go smoothly with the sale of your current home.
That’s asking a lot.
What Can Go Wrong With a Contingent Offer
You know the house you are selling in Austin is awesome and you have a strong buyer for it.
What could possibly go wrong?
- The buyer may want more repairs than you’re willing to do and you’re going to be between a rock and a hard place if they realize you need to sell yours to buy the one you’re moving in to.
- The appraiser might not find the value in your home necessary for the bank to lend according to the contract price. Either you’ll need to close the gap, or get the buyers to kick in more cash to make up the difference.
- The buyers might do something foolish like change jobs or buy new furniture before closing on the purchase, which can kill their pre-approval with their lender.
A good seller’s agent – the one representing the owners of the home you want to purchase – will go over these potential problems when they are reviewing your offer.
The Counter Offer You’ll Get Back
It’s unlikely the seller will accept both a low price and the contingency that you sell your other home.
Because of the three points listed above, you will probably get a counter offer that brings the price back up to market price, and possibly with other changes that put you in a tough spot – a shorter option period, a bigger option payment, a tighter financing contingency .
You’ve lost your negotiating edge – the edge that would have let you arrange better terms on the purchase contract – because you didn’t sell your current home before making an offer on the next one.
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