How to Negotiate the Price of a Home

As a buyer, understanding the negotiation process can help you secure the best deal and avoid costly mistakes. After all, the price directly impacts your financial wellbeing and monthly budget for decades to come. 

What goes into negotiating house price?

Follow our guidance to learn how to negotiate buying a house—and avoid common first-time homebuyer mistakes in the process.

Understanding the market

The first thing to understand is whether you’re in a buyer’s market (when housing inventory is high, and buyers have more purchasing power) or a seller’s market (when housing inventory is low, and sellers can typically get a higher price). 

While knowing the difference between a buyer’s market and a seller’s market is a good first step, your real estate professional should also direct your attention to other local market influences, such as:

• Competition in the neighborhood
• Location of the home to sought-after amenities
• Price of similar homes in the neighborhood

Having a good grasp of local pricing trends can help you come to the buying table with a strong first offer—and give you a good idea on how to bargain house price from this starting point.

Working with a skilled real estate professional

A great real estate professional is more than just someone who has access to a large inventory of homes. They’re also skilled negotiators. A talented real estate professional will leverage:

• Market Analysis: What’s the fair market value for this specific home, given the latest market trends?
• Comparable Sales Data: How much are similar houses in the area selling for? 
• Effective Communication: How should the agent communicate with the individuals on the other side of the table—and how can they respond quickly enough to keep them engaged?
• Offers And Counteroffers: How can they make an offer that’s compelling to the other side without making you pay more than you’re comfortable with?

Talk to your real estate professional to see what other strategies they may be able to leverage in negotiating house price. 

Starting with a competitive offer

Starting with a competitive offer is critical to laying the groundwork for successful negotiations. Your real estate professional will discuss the appropriate approach to take depending on your scenario. 

A well-researched, fair initial offer demonstrates that you're serious about purchasing the property while leaving room for potential negotiation. A competitive offer a real estate professional may offer would entail:

• Analyzing Comparable Sales: Recent sale data in the area for homes with similar size, condition, and location provides a baseline for your offer.
• Considering Market Conditions: In a seller’s market, a competitive offer may be close to the asking price—or even slightly above if there are multiple bids. In a buyer’s market, you might have more flexibility to start lower.
• Factoring in the Home’s Condition: If the house is in pristine condition or has recent upgrades, you may adjust your offer to reflect its higher value. Conversely, if the property needs significant work, your offer can reflect those additional costs.

The goal is to show you're serious while maintaining a strategic position that allows you to negotiate further if needed.

Leveraging the home inspection

As a buyer, the home inspection is one of your best negotiation tools. If the inspector uncovers serious issues, your real estate professional can leverage these into your offer, usually in one of two ways:

• Your real estate professional can ask the seller to lower the price to accommodate the cost of future repairs. 
• Your real estate professional can ask the seller to complete repairs or maintenance before the sale closes, so you’re not on the hook for repairs after you take on ownership. 

The inspection is one of your best bargaining chips, so don’t miss out on this opportunity!

Evaluating the seller’s position

As the buyer, put yourself in the seller’s shoes. Your real estate professional may ask:

• How motivated are they to sell?
• How motivated are they to sell right now?
• How motivated are they to sell at a high price point?

Factors like moving before the school year, moving for a new job in a couple of weeks, or selling to settle debts all have different influences on the seller’s immediate wants and needs inside the transaction. 

For example, if the seller is motivated to sell quickly, they may be willing to sell at a lower price if it means the transaction can move faster. 

If the seller is trying to get as much value as possible for the transaction, they may be willing to make certain compromises (like purchasing a sellers home warranty for the buyer of their home) to deliver extra value to you as the buyer and your real estate professional.  

Having a deep understanding of the seller can help you make strategic negotiation decisions, and it could even help reduce closing costs!

Being prepared to compromise

Negotiating house price is a two-way street, and compromise is often necessary to reach a mutually beneficial agreement. By staying flexible, you can maintain goodwill and avoid potential deal-breakers.

Here’s how to approach compromise effectively:

• Prioritize Your Must-Haves: Separate your non-negotiables from the items you’re willing to give up. For example, securing a lower price might be more important than insisting on a specific closing date.
• Stay Open to Creative Solutions: If the seller can’t meet your price, explore other options like including appliances, furniture, or offering seller-paid closing costs to sweeten the deal.
• Keep Emotions in Check: Remember that this is a business transaction. Staying objective will help you make decisions that align with your goals rather than reacting out of frustration or excitement.

Ultimately, a willingness to compromise can strengthen your position and keep the negotiation process moving forward. 

Understanding contingencies 

Contingencies are clauses in your purchase agreement that protect you if certain conditions aren’t met. They are invaluable tools for safeguarding your interests as a buyer and can give you more leverage during negotiations.

Some common contingencies include:

• Inspection Contingency: Allows you to renegotiate or back out of the deal if the home inspection uncovers major issues.
• Financing Contingency: Protects you in case you’re unable to secure a loan within the specified time frame.
• Appraisal Contingency: Ensures the property is valued at or above the agreed-upon price; if it’s appraised for less, you can renegotiate or walk away.

Your real estate professional will work with you on contingencies. Using contingencies strategically signals to the seller that you’re serious but cautious. Be careful not to overuse them, as too many contingencies can make your offer less appealing, especially in a competitive market.

Knowing when to walk away

Work with your real estate professional to determine when a deal is unsalvageable—and when it’s better to simply walk away than to continue negotiating with someone who isn’t willing to compromise with you. 

Walking away at the right time can prevent stepping into a terrible deal, and it can prevent the dreaded buyer’s remorse in the process.

Adding an American Home Shield® home warranty

No matter how your negotiations go, you want to make sure you’re protecting the investment you’re making. With an American Home Shield home warranty plan, you get an extra layer of protection that goes beyond the initial purchase, providing peace of mind.

When inevitable breakdowns happen, adding a home warranty to the real estate transaction could save you from the financial strain of costly repairs or replacements. With coverage for covered system and appliance components, you can rest easy knowing your home will continue to run smoothly after you move in.

Ready to add that extra value and reassurance? Explore our home warranty plans for buyers today and discover how we can help make your transition to homeownership stress-free. Are you a real estate professional? Partner with AHS to become a Real Estate Pro today.

AHS assumes no responsibility, and specifically disclaims all liability, for your use of any and all information contained herein.