It’s a fact… negotiation strategies are the best ways to get the best price, regardless of what you are buying. The more information you have, the better your negotiating position.
Get the Facts from the FSBO Seller
Take a moment and try to see things from the FSBO Seller’s point of view. Asking the right questions can save thousands if you take the time to understand the FSBO Sellers’ reason for selling in the first place. Knowing what circumstances have brought the FSBO Seller to this point is very important to understanding the pressure, needs and fears of the seller. By addressing his or her needs, the negotiations can go much smoother. Try to discover the following:
- Are they relocating for employment reasons? If not, try to determine whether the reason relates to an issue with the home
- Have they already bought another home, and need this one sold in order to pay for it?
- Are they divorcing?
- Are they financially unable to keep the home?
This information will help you determine the urgency of the sale, or whether a seller is just fishing for a price above fair market value.
Get the Facts on the Local Market
Most of this information can be found simply by looking at comparable homes in the neighborhood. The internet is a great tool for this project. You can also personally view other homes and see how they compare. Some things to keep in mind: how long has the seller’s home been on the market, and what prices have homes sold for in the last 6 months? Neighbors are also a great source of information- while they sometimes share more than you can imagine, but you can never have too much information! By speaking with neighbors, you’ll gain a sense of what life is like in the community and perhaps even pick up some insight as to why the seller is moving.
Listen, Don’t Talk…
While looking for information on the FSBO Seller, it’s important to divulge as little about yourself as possible. Any knowledge you provide could be used by the seller as leverage. For example, you may want to pay cash for the house, but the FSBO Seller doesn’t have to know that! If the seller is aware that you are capable of paying cash, they will likely hold firm to their asking price, because it shows them that you are more than capable of paying the initial asking price.
Leave Your Options Open
When you begin negotiating a specific property, make sure you have identified several other homes you’d be happy with as well. Never negotiate without more than one option. Even if you find the perfect home for your family, find another house as a second choice so you are (psychologically!) not so desperate to buy the first house. By not having open options, you may end up giving the FSBO Seller whatever he or she demands just because you love the house, and not because it’s worth the asking price. When negotiating either directly or through your agent, it’s to your ultimate advantage to tactfully let the seller know that theirs is not the only property you are considering.
Home buying is a huge investment- you don’t want to commit yourself to it without doing your financial homework as well. Although this takes some of the thrill out of house shopping, it is imperative to saving money. The more you know about what’s involved, and how to bargain, the more cash you save for decorating and new furniture after the sale.
*A note about homes that are in foreclosure: they are generally sold at auctions or in an open court bid for what is owed on them. This is done so that the lender can get the money that is due to them. You will need to have a line of credit or loan money in place well before bidding or negotiation, as these sales do not usually allow conditions. If you are interested in this type of purchase, do your homework and know how the sales process works before entering a bid.
Since you will likely be financing your new home, you want to get the best possible price for it. One of the very first steps is to make sure you have been to see your mortgage broker or financial institution for Pre-Approval. FSBO Seller’s are far more willing to deal with someone who has the financing in place when it comes to accepting an offer. In terms of bargaining power, a pre-approval mortgage will usually entice the FSBO Seller to deal with the sure thing, over prospective buyers without approval.
Getting “pre-approved” is a more in-depth process than getting “pre-qualified”. This process means you have been approved for a specific loan amount on a home, which can instill confidence in an FSBO Seller, since all of the background checks and financial verifications will have already been done. All that would remain to be done is for both parties to accept the offer and for an inspection of the home to be completed.
Upon closing, here are some final words of wisdom to help you with your negotiations.
It is imperative that you understand bargaining and negotiations if you wish to buy a home through a private seller [FSBO] because you have to do all of the negotiating on your own. You must also be knowledgeable of the material in your contract to ensure you are getting exactly what you think you are getting. Most people are much more comfortable buying a home through a real estate agent. However, many owners that sell their homes privately [For Sale by Owner] are able to offer a lower price because they don’t have to cover agent fees. As a For Sale By Owner [FSBO], there are countless resources available to you. For example, you could have someone in the legal field or a real estate agent read over the materials for you- for a reasonable fee- to verify that everything is accurate.