How To Negotiate House Price and Other Factors in a Home Purchase

Buying a home is a considerable investment, so you want to make sure you're getting the best value possible by negotiating. However, you may be wondering exactly how to negotiate a house's price, as it may not be something you've done before—and every homebuying situation is unique.

Learn more about what the home negotiation process looks like, what's negotiable (hint: it's not just the list price), how market conditions factor in, and a few tried-and-true tips to help you score the best deal possible.

Why Should You Negotiate a House Price?

Negotiating a home price can be one of the more challenging aspects of buying a home. However, it ranks among the most important actions you can take because you're spending a lot of money—negotiation is your chance to get the best deal possible on the home you want.

Negotiating is expected when you're buying a home; it's also in your best interest to get the lowest price. Sellers generally price their homes high in expectation of negotiating with buyers. They also want to get the best price they can, so pricing a home high lets a negotiating buyer talk them down to the actual price they are looking for. It also helps the buyer feel like they got a good deal.

However, negotiations may not always be only about the home's price—sometimes, when you're buying a home, the inspector might find costly repairs that need to be made. Depending on market conditions, you could ask for the repairs to be made or for a reduced price and pay for the repairs yourself.

The Home Price Negotiation Process

After finding a home you're interested in, it's typical that a buyer will make an offer to the seller. The first offer may be below the asking price in some scenarios, while some buyers may offer more if the market is competitive. Either way, here's how you can expect the process to play out.

The Offer

Bonnie Galam, a New Jersey-based real estate attorney, told The Balance in an email that the buyer is the one who submits the initial offer to the seller, usually by way of a realtor if the property is listed on a multiple listing service (MLS), or sometimes through an attorney.

Realtors can help you figure out if the home is "priced right" based on the market value and comparable sales or if it might be priced slightly above or below its actual value, leaving more room for negotiation.

"The buyer should consider the pace, competitiveness, and tolerances of the market in determining the opening number," said Joanne Greene, a 25-year real estate agent at Brown Harris Stevens in New York, via email. Your main goal with an offer is to open up the conversation and get a response.

In general, if your offer is below the listing price, you can expect the seller to respond with a counteroffer.

The Counteroffer

Typically, a seller will respond to your offer within a few days, either to accept it or to counter it with a different number. At this point, the seller generally has the leverage because they choose which offer to accept, Rick Albert, broker associate with LAMERICA Real Estate in California, told The Balance in an email.

An Agreement

In some cases, there could be additional back and forth between the buyer and seller before reaching a number; one of the parties may even decide that it will not work out. If they agree, the buyer and seller sign a contract for the sale, and the home is listed as "under contract." After the home goes under contract, several more steps must be completed before the sale is final.

How To Negotiate After an Inspection

Just because a house is under contract doesn't mean that the negotiations are over. Because the seller is locked in with the buyer, the leverage actually shifts to the buyer, Albert said. This is especially true after the home inspection takes place.

What Can You Negotiate When You're Buying a Home?

Although negotiating the sale price is important, you should also think beyond just how close to the list price your initial offer will be. Especially in a tight market, there might not be as much deviation from the original listed price. However, other aspects may be negotiable.

"Beyond just the price, there's the closing date, the scope of inspections and their timeframes, closing costs, and even special terms like letting the seller stay in the property post-closing or including personal property like furniture in the sale," Galam said.

With the typical expense of closing costs looming, buyers sometimes ask the seller for closing cost credits, which can help lower out-of-pocket expenses.

Other things that may be negotiable in a home purchase:

• Inclusion of furniture/fixtures: If a seller doesn't budge on price but is willing to leave all of the custom window treatments, a chandelier, or a set of patio furniture, that could save the buyer money after the home sale.
• Home warranty: Buyers can ask that the seller pays for a home warranty premium for the first year; they may be able to negotiate for the seller to pay the deductible for any repairs within a specific period.
• Replacement cost for older appliances: If major appliances are outdated, sometimes a buyer can successfully get the seller to agree to a price drop to cover their replacement.
• Upgraded finishes or repairs: Some sellers might be willing to fix or modernize some aspects of the home to sweeten the deal. This could include anything from landscaping to regrouting bathroom tiles.
• The closing date: Often, sellers may need to move the process along more quickly, or perhaps they want to slow things down as they look for their next home. A buyer who agrees to a more flexible timeline might be more attractive than someone with a slightly higher price offer.
• Post-closing: With some purchases, a seller might ask to remain in the home and rent it from the new owner for a short period of time, an arrangement known as a "leaseback."

How Market Conditions Affect Home Price Negotiations

Sellers have the upper hand in negotiations when there's a low amount of housing inventory on the market, Galam said. "They're able to essentially tell buyers to take their terms or leave it because they are confident another buyer would."

For example, in December 2021, the national inventory of home-sale listings was 26.8% lower than that month the year before, according to Realtor.com research. This also has driven prices higher.

While there's no doubt that the general atmosphere of a market sets the pace, the other significant factor at play is the seller's personal situation. "If a seller is already in contract on the purchase of their next property, they tend to be more inclined to negotiate than an opportunistic seller who has nothing but time on their side," Greene said.

How To Negotiate Professionally and Effectively

Although dollars and legalities are at the heart of negotiation, personality and professionalism come into play in many cases. Keep these negotiation tips in mind when you're buying a home:

• Be reasonable: Going in with a lowball offer can be perceived as disrespect to a seller. While it's OK to be aggressive, be sure to understand the market you're working with.
• Find common ground with the seller: Though a seller doesn't necessarily have to like you to close a deal, making a connection can help negotiations go more smoothly.
• Pick your battles: Buyers who are willing to take the time to understand the seller's needs may be more successful in getting the things that they want, whether it's agreeing to close quickly or not being nitpicky about a minor repair. It's important to be flexible.
• Keep the process running smoothly: It helps to make sure you have your preapproval letter ready to go, put down a fair earnest money deposit, schedule the inspection at a convenient time for the seller, and do anything else you can to expedite the sale.

When To Stop Negotiating

Not all negotiations will go in your favor, and it might be best to move on in some cases.

Understanding your personal budget and goals is key, Albert said. "It is common for people to get hyped up in the moment and do something they regret," he said. This can include offering too much or not pushing back hard enough when negotiating repairs.

The best advice is to trust your gut. "You should stop negotiating once you've passed your comfort level," Galam said.

The Bottom Line

Learning the basics of how to negotiate a home's price will help you through the process. If you're a first-time homebuyer, it's probably best to work with a real estate agent or attorney who can help you navigate market conditions and advocate for you to get the best deal possible.

Frequently Asked Questions (FAQs)