Q & A Table of Contents
Bargaining To Buy A New Home
From: Tanya, Bellflower, California
Question: I am interested in purchasing a new townhome in
California. i have been looking for quite some time and I
have noticed that the bargaining power for the buyer seems
to be associated with the location. The more distant the
property is from Los Angeles, them more the builder/seller
is willing to negotiate. I did speak with the builder on
their incentives, and they told me that due to the fact
the buildings are selling, the incentives they offer are
(in my view) nominal at best. However, all around the
area, there are tons are homes for sale. How should I
approach this?
Response: The incentives offered up front by the
developer are not binding on you; you should certainly
accept whatever incentives the developer offers which
happen to meet your interests — but you should not stop at
that point and accept the whole deal. The incentives a
seller builds into his/her offer are what the seller has
already factored in to his/her preferred deal.
Negotiation is about trading things of value — and if the
developer is prepared to give things away (in the form of
incentives) if you just ask for them, s/he is not
bargaining away anything that was not already on the table
in his/her mind.
Before taking your next steps in this particular
negotiation you should do good homework about your housing
choices. Are there other developments in the same area
you could find attractive? What can you learn about the
relationship between asking prices and actual sale prices
in the area? Can you learn anything about the deals the
developer has already made? With this information in mind
you can do a much better job of planning and going forward
with the negotiation process.
If you have a real estate broker representing or advising
you, they should help you with this. Even though real
estate brokers have an incentive to make deals happen for
higher prices (their commission tends to be based on
price), they have an even stronger incentive to make deals
happen — because unless there is a sale there is no
commission. If a real estate broker representing you is
not involved, perhaps you can get good advice from the
bank from which you will be getting your mortgage. A
local bank that understands the local market can be a
tremendous asset.
If the developer has deep pockets and little incentive to
sell quickly, that could indicate he/she is not likely to
move away from the asking price plus the incentives
already offered. If local housing prices are steady or
falling, if the developer has undertaken an aggressive
sales campaign (advertizing, other promotions or
incentives, etc.) that indicates s/he needs to make deals.
Understanding those factors should help you understand
what you can do.
In the meantime, you have to assess your own situation:
how much can you afford to pay — including down payment,
closing costs, mortgage payments, and whatever you will
have to spend for decorating, furnishing, and moving.
Once you have this information in mind, you will know what
kinds of price flexibility you have. If the developer
will do any decorating or customizing you need, that may
be a good bargaining point for both the developer and you
to use to reach agreement on price and other issues.
When a seller’s offer is accompanied by incentives — or if
incentives are offered without anything requested in trade
— that means the overall package is just an opening
gambit. Don’t let the opening deter you from pursuing
your interests; if the seller wants to make a deal,
whatever you offer (unless it is totally unreasonable) is
likely to bring about a counter-offer and a negotiation
process that yields a mutually-agreeable deal.
Good luck,
Steve
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