Pricing the Home
My first exposure to bargaining was in grade school. I played the part of a Mexican vendor givingadvice to his new gringo friends. I still remember my lines (after all, it wasmy debut!) “First, ask the vendor howmuch the pottery costs; his price is double the cost. Offer him less than cost, but enough so youmeet in the middle and you are both happy. Senor, you should never be mad or act insulted . . . bargaining shouldbe a game everyone enjoys.” Buying ahouse is not like buying a pot in old Mexico, but there’s a message here for usall. First, you must know the rulesbefore you begin to bargain and have some understanding of how the Seller haspriced his home. Second, don’t take theprocess personally. Even though buyingor selling a home is one of the most personal of decisions, you will be muchmore effective in your bargaining if you remain detached and enjoy theprocess.
A few weeks ago I took my clients Pat and Kim househunting. We visited two homes in anupscale neighborhood. They werecomparable, except that one had a pool and a remodeled kitchen and was pricedmuch higher. I knew my buyers wanted aremodeled kitchen and a pool but I took them by the other home to give them areference for bargaining. The problem wasthat the Seller of the tricked out home put the price of all those extras righton top, plus added room for bargaining. Ihad already given Pat and Kim a Comparative Market Analysis of these homes sothey knew what comparable homes had sold for in the neighborhood. They quickly realized that this Seller hadpriced himself out of their bargaining range. They decided they could buy the less expensive home and then add thepool and kitchen of their dreams.
The two parties could have found a meeting place if theSeller had really been aware of the market value of his additions. Pat and Kim would have seen that they weregetting a benefit if the Seller had not priced the home so high so there wouldbe “bargaining room”. As a Seller, it isbetter to stay firm with a realistic price than price the home high and thenbargain down. But, how do you find thatmagic number? You must dispassionatelycompare the property to those which have sold and avoid putting a high price onupgrades. In today’s market, most upgradesadd less than half their installation value to the price of a home.
Buyers and Sellers should go through the same process whentrying to decide upon the purchase price of a home. When they don’t, bargaining to an agreedprice often leads to heartache and hard feelings - if not a lost sale. Whether you are a Buyer or a Seller, take arealistic look at the market in your area. Get an appraisal or ask your REALTOR® to provide you with a ComparativeMarket Analysis. The more you know aboutthe homes which have sold in the neighborhood in the last six months, thebetter armed you are for a successful negotiation.
ConsumerReports: How to bargain for almost anything
Bargainingto buy the best home: Negotiating tips