Competitive housing markets can prove stressful for buyers. Regardless of whether you're shopping for your first, fifth, or fifteenth home or looking to secure your umpteenth investment property, a market short on supply but long on-demand can prove challenging to navigate.
In such a climate, the home-buying process requires plenty of patience and a savvy set of negotiating skills.
Let's examine four tips on negotiation in a competitive real estate market.
Lay Out Your Goals Early
A competitive market usually means a seller's market. That translates into a high number of desperate house-hunters bidding on the same small pool of homes. The offer and negotiation phase can be fast and furious.
To keep your cool, prepare yourself by laying a specific set of goals for finding your home. Then create a budget and stick to it. Finally, determine how high you're willing to go in your offers and counteroffers to secure a home you love.
Contemplate the concessions and conditions you're willing to accept or those that may cause you to walk away. We never recommend forgoing the home inspection or falling into the trap of agreeing to clauses or concessions you're not comfortable making. Make a plan for how you approach such scenarios.
For example, if a seller’s agent encourages you to forgo an inspection contingency, circumvent those maneuvers by having an inspector or a contractor you trust accompany you on a showing. That gives you an advantage going forward during negotiations and keeps you a step ahead of other buyers.
Never be afraid to walk away from a negotiation you're uncomfortable with. In fact, be prepared to walk away from a few before finding the right house.
Arm yourself with up-to-date market data so that every step of the buying process comes from a position of knowledge. You never want to overspend.
Though every home negotiation will be different, preparation ensures you avoid highly emotional decisions and make sound financial choices.
Make Your Offer and Let it Be
There's an adage in negotiation technique that says the person who speaks first loses. That may sound a bit harsh, but there is a sliver of truth to it.
When you're ready to put down an offer, make sure it's highly competitive and comes from a place of knowledge.
Require the seller to respond to your offer first. Continually tweaking your offer (or counteroffer) before a seller says yay or nay weakens your position.
After all, You've already replied to their opening offer—the list price—so now it's their turn. Rarely is the initial offer ever accepted. But by giving the seller time to consider your offer, you gain a better understanding of where they want to take the negotiations and if it's a place you're comfortable going.
Stake Out a Strong Negotiation Position
With so many buyers competing for a limited number of homes, it can prove challenging to even get your offer noticed, that is unless you make it from a solid initial position.
Of course, if you can make an all-cash offer, you're in the driver's seat. Cash bypasses the time-consuming and sometimes delay-inducing financing process. In some scenarios, it even allows you to negotiate the price downward with an eager seller.
If you do move forward with negotiating a cash deal, have your proof of funds or money in escrow with your attorney before entering the offer process.
Should cash be off the table, make sure your financing is pre-approved. Offers with pre-approvals in hand indicate your seriousness to a seller. You already addressed the most laborious part of the financing process, and you're ready to deal.
Sellers appreciate and are willing to work with buyers who want to close as quickly as they do.
Only Communicate Through Your Agent
Finally, real estate transactions are fraught with emotion. The seller is letting go of a home where they made memories, and you want to acquire that home so you can create new ones.
Using a trusted, knowledgeable agent to negotiate on your behalf keeps the emotional aspect of the transaction in check. They also serve as a trusted guide in navigating the finer points of offers and counteroffers and how to strengthen your position or know when it's time to look elsewhere.
There's also a good chance your agent will know the seller's agent, if not personally, at least on a professional level—particularly in smaller markets or submarkets. This can provide additional insight into what a seller is after and allow you to tailor your offers more competitively.
If you're ready to explore the best of Greenwich real estate and need a trusted partner to help sell your current home and secure your next residence, contact Mia Simonsen today to start your home selling or buying journey. Look to Mia's years of experience and expertise to be your guide on your real-estate journey.