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How to Negotiate Real Estate in a Hot Market


Negotiating tactics vary depending on the market. Asking for too many repairs or a lower price in a hot market could mean you lose the house. Offer too much, and you overpay. Although your real estate agent will be doing the negotiating directly with the seller’s agent — it’s good for you to know the dos and don’ts of negotiating in a seller’s market.

Hot Market Tips

  • Escalation clause — when you put an escalation clause into your purchase contract, you’re offering to pay a specific amount above the highest bid up to a certain point. Doing that can help ensure you’re the highest bidder and your bid has a good chance of being accepted.  
  • Create a win-win ­— when negotiating, it’s essential to make sure that both sides win. No seller wants to work with a buyer that wants everything and offers nothing.
  • Keep it simple — don’t ask for a lot. For example, when there are more homes for sale than buyers, you might ask the seller to pay for some of your closing costs. But in a seller’s market — that’s not a good idea when there are twenty other buyers lined up behind you.

Putting Your Best Foot Forward

Sellers and agents want to work with realtors who are professional and easy to get along with. Given two similar offers, who wouldn’t choose the more amicable agent? So, when you’re interviewing realtors, ask how they handle negotiations and stressful situations. Try and get an idea whether they would keep their cool during the challenges that come up in every transaction.

  • Stay positive — make sure your realtor doesn’t open the conversation about everything you don’t like about the property. The seller most likely knows what’s wrong with their home. Just state your price. Then see what the seller says. Let them start the negotiation.
  • Find out what’s the most important thing to the seller — price or terms. Although price is always top of the list, sometimes other things are equally important to the seller. For example, maybe they want to lease back their home for 30 to 60 days. Or possibly they want a fast close. Find out what they need and include that in your offer.
  • Keep it cool ­during negotiations and in escrow — it’s easy to get stressed out. And sometimes, it’s hard not to get into an adversarial state of mind. But if you, as the buyer, can keep a cool head, that helps everyone. And your home purchase has a better chance of moving along and closing.

Keep in mind, some of the best real estate negotiation skills are good manners.

How to Negotiate a Counteroffer — Real Estate

Having a real estate negotiation expert that knows the market and property value is vital. That’s why you’re working with a realtor instead of trying to buy a home on your own. Take advantage of their expertise and experience to make sure you don’t overpay — or offer too little and insult the seller.

When you find a home you like, sit down with your realtor, and write up an offer. In a hot seller’s market where bidding wars are the norm, it’s advisable to put in your best offer first. Otherwise, someone else will outbid you. Once you put in your original offer, see what the seller comes back with. If their response is unrealistic and too far away from what you want, you may want to walk away and keep looking.

Consider the Market Temperature When Negotiating

Sometimes buyers want to put in a low-ball bid, to begin with. Maybe they’ve been told that’s the way to negotiate. But in a hot market, that’s the absolute opposite of what you should do.

When there are more buyers than sellers and bidding wars are the norm, you’ll probably need to offer above the asking price.

Don’t Sweat the Small Stuff — Negotiate the Big Stuff

Even though there’s lots of competition, don’t overlook essential aspects of the property. You’ll want to make sure you know the condition. So even if there are items to repair that will be your responsibility, with a thorough inspection, you won’t be surprised down the road. Here are the main things to watch out for:

  • Roof — if the roof is older, make sure there’s enough life in it. Lenders don’t want to loan on a home where the roof will need to be replaced before too long.
  • Dry rot — significant dry rot is a red flag, that is, unless you’re a contractor and are looking for a fixer.
  • HVAC — reliable heating and air system are important, so make sure it’s in a good condition.

Even if you’re going to purchase the house AS-IS, it’s wise to have a home inspection, so you know what you’re getting into.

And speaking of inspections, when you get the appraisal, keep in mind that the property has to appraise for at least what you’re offering. If it doesn’t — it’s back to the negotiating table.

Speed & Timing is Everything

In a hot market, you have to work fast. That means you don’t take days to get back to a seller. And when a new property comes on the market, go see it right away. Realize there are multiple buyers for every property and you have to be on the ball if you’re going to compete. Best of luck in your house hunting endeavors!

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After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5