Negotiating A New Home Purchase

It is still a competitive seller’s market out there.  It is really difficult to negotiate with sellers when there is so much competition from other buyers.  It is even more difficult to negotiate with builders selling new homes.  They have a steady stream of homes they are trying to sell.  The last thing they want to do is accept a price reduction.  This will hurt them going forward for their future sales.  Buyers will reason that because they sold to a previous buyer at a reduced price, the seller should always accept this lower sales price.

To successfully negotiate, you have to understand the builder’s mindset. If you can let them keep their list price but get them to give in on other items, you will have better luck.

Builders will often give free upgrades.  Check out their model home to see if they have blinds, a backyard deck, fencing, refrigerator, air conditioning, or a garage door opener you might like.  You can see if they will add a few of these items to your home if you pay their full list price.  This will benefit you since you won’t have to make these improvements yourself after you move in and pay for them with a high interest rate credit card.  Instead, you get these items rolled into the purchase price of the home and they will be covered by your home mortgage with a low interest rate.

You can also see if the seller will pay for some of your closing costs.  Closing costs can be roughly 3% of the sales price of the home.  For a $300,000 home, this is $9,000 you will have to come up with at closing.  Getting the funds for the closing costs is a huge hurdle for home buyers.  But, if you can get the seller to pay for some of this, you can conserve your cash and get these closing costs covered by your low interest rate mortgage.

Well, talking about this is easy.  Getting the seller to agree to it is the challenge.  Have your real estate agent talk to the seller’s agent to see what the builder typically agrees to (see my other blog about the dangers of not having an agent to represent you).  If you structure your offer to be comparable with what the seller has accepted on the most recent offers, there is a good chance your offer will be accepted.  If you try to get too much more than what the builder typically accepts, your offer will probably be rejected.

In the current competitive seller’s market, this win-win tactic is the best way to negotiate with home builders.  The seller can keep their list price.  And, you get a few upgrades or some closing costs included in the deal and paid with your low interest rate mortgage.  Happy bidding!