Are you in the market for a first home, but dread paying too much or being taken for granted? If so, you are certainly not alone. Most first time homebuyers feel two things – excitement and fear. Remind yourself that buying your first home is a big step of responsibility and a big investment. Therefore, you want to do all you can to get the most house for your hard-earned money. For this reason, you need to learn the art of negotiation. Unfortunately, the most common mistake seen among first time buyers is pass up the opportunity for a good negotiation session.
Haggling as some call it could be the number one reason you agree for a price too high. Without haggling or negotiation, you could pay a higher price than the house is even worth. The bottom line is that when a person puts their house on the market, the price is increased knowing the buyer is going to negotiate. Therefore, this built-in process should be used to your advantage.
One of the most powerful keys to negotiation is becoming pre-approved. Different from pre-qualified, being pre-approved means you have already met with a lender, filled out all the necessary paperwork, and actually been approved for a loan. This means for a specific amount of time, money is available to you. Therefore, all you have to do is find the house and the deal is done. The huge benefit with pre-approval is that you have tremendous negotiating power since the buyer knows the money is already approved. This means a quicker move and no problems.
Keep in mind that you can also go through the pre-qualification process, which is also good for negotiating but not as powerful. In this case, you have met with the lender, filled out paperwork, and been told what you would be able to be approved for. In other words, your paperwork never went to the underwriters for actual approval. However, you do have a good idea of your approval status and the amount of money you could qualify for.
If you have not been pre-qualified or pre-approved, then you need to determine your budget and then stick with it. That means if you find a house that is perfect but it costs $5,000 more, you would have to negotiate the seller down $5,000 or simply not buy the house. Now, the key to success here is doing a little research to determine the true value of the home you want. By knowing this information, you again have knowledge that leads to negotiating power.