Getting the best deal on your next home.

You've been out house hunting for weeks and you've done all your research and now you want to put in an offer to purchase the home of your dreams. So how much do you offer the seller?!! And is it really how much you offer or how you offer it?

Reasonable Market Price

Before

doing anything else you need to know what a reasonable market price is for the home you hope to buy. Have your real estate agent run a Comparable Market Analysis for you on similar homes that have sold in the last year in your target neighborhood. Although an appraiser will only use the last six months of comparable sales when figuring appraisal value, it is helpful to have a more overall trend for the neighborhood to determine that prices are rising and that your investment will be protected in the long run.

To arrive at a reasonable market price you and your agent will be comparing the condition, location and amenities of similar homes that have already sold plus the current market competition of other homes for sale in the area.

Your Price

Then you must figure out what YOU are willing to pay for this home. If you are willing to pay market value or more for this home because you don't want to risk losing it, please let your agent know up front! Most good agents will try and negotiate a below market sales price for you because they want to please you and retain you as a future client. But only you can determine how you might feel if you lost this home to another buyer for a few thousand dollars!!! If you want a deal be sure to tell your agent that, but if you want only this home, tell your agent that too! His negotiating tactics will depend heavily on this information.

Seller Motivation

You must try and determine what is most important to your particular seller. If possible try and find out the answer to why he is selling his home. It may give you some insight as to what he is or is not willing to take or where he is willing to make a trade off. Although this may sound obvious, sometimes the reason "why" may not lead to the sales price you would expect.

* Is it a divorce sale? Statistics show that while you may get lucky with the "just want out of it" seller, far more often one party or the other may not want to sell at all and may hold out for a higher sales price than the market may indicate. Even if you get a good price, arguments between the sellers could make more problems later than it was worth.

* Is it a foreclosure sale? These properties tend to be over-mortgaged in the first place, and unless you can get the underlying lender to agree to a "short sale" the seller may owe more than the property is worth. Short sales can be worthwhile, but are not a "sure" thing and may take much longer to close.

* Is it a job transfer? If the seller has a wonderful job offer in another state he may indeed be willing to settle for less for a "quick" closing so that he can move on and not have to worry about making double payments. If it is a corporate relocation, the relocation company has probably offered the seller a set amount for his home (typically less than market) with a bonus to the seller if he can sell it himself first.

* Is the seller buying another home? This can be good or bad. Some sellers need to realize every cent out of a transaction to be able to purchase their new home, otherwise they just cannot afford to sell at all. Others are able to sacrifice part of their profit so that they don't lose their dream home, especially if you are willing to be negotiable about moving dates. Some may actually prefer a longer escrow so that they don't have to hassle with the expense or aggravation of moving twice.

* Is there an illness? Often the seller in this situation may have more of a sense of urgency and may be willing to settle for less for a quick sale.

* Is the seller getting married? Sometimes the euphoria of a new life can also lead to a better deal for the buyer!

* Is the seller retiring? Many times retirees feel that they must realize the maximum the profits from their existing home as they will no longer be earning a salaried income.

Other major factors in a seller's willingness to bargain may be the length of time the house has been on the market, a death in a family, job instability, homesickness, etc. Once you have determined the seller's probable motivation then it is time to position yourself so that you can give the seller most of what he wants so that you can get what you want--the lowest possible price!

Improving Your Negotiating Position

* Don't show emotion when previewing the home. Be polite, but if you let the seller know what you are really thinking it doesn't matter what else you do! He knows he's got you hooked.

* Get totally loan approved. A pre-approved buyer (not just pre-qualified) is almost as strong as a cash buyer. And if you are totally certain of your ability to obtain the necessary financing you may even want to remove all financing contingencies except appraisal so that you are exactly like a cash buyer. By letting the seller know that you are willing to risk your earnest deposit in this fashion he can assured you are serious and confident of a timely closing.

* Offer the seller more earnest deposit than he was asking for. This is guaranteed to get the seller's attention when you are negotiating. By giving him a larger earnest deposit be is assured of your seriousness and is confident of a timely closing.

* Be flexible about moving dates. Whether the seller wants more or less time on a closing, if you can give him what he needs here, you can almost always assure yourself of some price concession. You may even offer to close and allow the seller to "lease back" the property from you for a short time. This gives him access to the funds he may need for closing on his next home or moving. Just be sure the lease back period is not longer than 30 days or your lender will consider you an investor and may charge you a higher interest rate. And make sure you retain a security deposit from the seller's proceeds in case something goes wrong at the house after the closing that is not covered by a home warranty policy.

* Hide your closing costs in the sales price. Though this does not necessarily work every time, sometimes a seller who feels he has received his "selling price" may agree to pay some of the buyers closing costs as part of the transaction. Instead of thinking of his bottom line--what he nets from the transaction--he is consumed by getting a specific amount for his property.

* Ask for seller concessions in the sales price. These can range from including existing appliances to a carpet or paint allowance.

Key Tactics

The final step is to "guess" what the seller was "hoping" to get, based on the information you have gathered about the seller and the property. If you offer too low he may be insulted and retaliate in kind on his counter offer. The key is to try and figure out an amount that is slightly less than what he was hoping to get, but that is close enough that he gets more nervous about losing a possible sale and a strong buyer than he is about lowering his sales price.

Remember, while your agent can advise you on possibilities, the ultimate decision on what to offer is yours. But if you use the above techniques you should almost always be able to negotiate a better than average deal!

Harrison Jones is a retired real estate broker and freelance writer.