As a homebuyer, how do I determine how much negotiating room I have?

When we advise homebuyers, we use several techniques to determine how negotiable a seller may be. We go through several steps prior to advising our buyer client on strategy.

How many days on market?

Generally, the longer a property is listed, the more flexible the seller is likely to be. If a listing is brand new, the seller will be unlikely to entertain a lowball offer given that the property has not yet had much exposure to the market. But for properties listed for 60-100 days, the seller is more likely to be apprehensive about making sure the property gets sold. They’ll likely be negotiable. Note that DOM (Days on Market) is a visible field in the MLS, and is public information.

MLS remarks.

In formulating our offer strategy, we look at the property’s MLS listing remarks for indications that the seller may be highly motivated. If “Bring us an offer” is among those remarks, we know that the seller’s door is wide open for a lower offer, and they are ready to negotiate.

A conversation with the listing agent.

Sometimes, the best way to find out about seller flexibility is to just ask. Representing buyers, we’ll often call listing agents and convey the following: “We have a client who is interested in your property, but price is a problem for them. I might be able to get them to come forward with their best offer, but I won’t do that if I know that the seller isn’t flexible. What should I tell them?” While it may seem typical for listing agents to put up a strong front, telling buyer agents that the seller is holding the line on price, listing agents are under pressure to get the home sold. If they know that the seller has price flexibility, they will often share that.

An analysis of past sales.

On each transaction, the MLS records the sales price, the list price, and the original list price (prior to price reductions). Analyzing past sales will inform us on how much other buyers are negotiating price down (or bidding price up) on other properties in the neighborhood. If we find that buyers are typically negotiating prices down by a given percentage within a particular neighborhood, we might suggest formulating an offer with a similar percentage discount off list.

In conclusion.

Every property listing or transaction is different. When we represent buyers, we work closely with them to formulate an offer strategy designed to obtain the property at the lowest possible price. After several years of real estate markets favoring sellers, today’s market is more of a buyer’s market. Buyers must be prepared to take the opportunity to conduct a well-informed negotiation on price.

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