Please enjoy this guest post from Jonathan Cowan. Jonathan is a sushi-loving freelance writer who specializes in personal finance, investment and trading.

Buying your next home will be emotional. You can count on it. And for the majority of you that means you’ll end up paying more than you should.  It’s all too easy for real estate brokers to exploit this weakness we all have. But it doesn’t have to be this way. Armed with a few simple tactics, you can play the game as well as any broker, secure your dream home and get a fantastic deal in the process.

But beware, the negotiations start the minute you contact your first broker. Read on to find out what to do and how to do it so you don’t pay a penny more than you need to with these simple steps.

Preparation Is The Key

The first step is knowing your spending limit and where the money is going to come from. Look into all the possible sources of money and the best deals you can find on loans.  There are 3 things you want to be sure of:

  • The maximum amount you can borrow
  • The maximum amount you can afford
  • How much you would prefer to spend

Number 1 is for your information only. No broker should ever know this number. Number 2 is your absolute top deck reserved for that extra special home that you simply have to have. Number 3 is what you’re aiming for.  These numbers are the bedrock of your negotiations later on. It’s going to be emotional but this will keep you grounded – don’t be drawn into buying a home you simply can’t afford.

Before you pick up the phone to a broker you should know exactly what you’re looking for. Number of bedrooms? Check. Distance from schools and amenities? Check. Size of garden? Check. And whatever else is important to you.

Then research the local market for asking prices and, more importantly, prices sold. Websites such as make this easy to do. You’ll get a feel for what you can afford and be able to take charge when requesting viewings.

Sound too obvious to you? Maybe so.

Knowledge is power and when you’re mid-negotiation you need to be confident that the price you’re offering is a fair one. It’ll be hard for a broker to counter a savvy buyer who is well informed.  Armed with this information you’re ready to make contact with brokers who are listing the types of home your research has led you to.

Before you do, remember that behind the charming exterior and gleaming smile of every broker is a savvy dealmaker set on selling property at the highest price possible.  The broker isn’t evil, he or she is just doing their job, but they’re not your friend either. Would you prefer they get a better pay check or you protect your hard earned wealth?

You have to play to win and may the best person do so.

How To Deal With The Broker

There are two golden rules when dealing with a real estate broker:

  • You’re always negotiating
  • The broker (and the seller they represent) need you more than you need them

Stay focused and give as little away as possible about what you’re thinking and what you’re feeling, allof which can be used against you when it’s time to negotiate.

When you’re with the broker, put your business face on. Be nice. Be courteous. Don’t act like you’re going into battle. But give nothing away.  They’ll want as much information from you as possible. Good salespeople are excellent at asking questions. But you’ve done your research and you know exactly what you want. So only reveal what you need to.  And when the killer question comes about your budget tell them a figure 10% below your comfortable spending limit or give a range around that level.

The next killer question is ‘Why are you buying’? They need to know what’s motivating you. Make it clear you’ve been looking for a while because you like the neighborhood and are considering buying within the year – but will move quicker if the right home is available.

Whatever you do make sure you don’t reveal any urgency. Negotiations will come to an end as soon as you do that.

Make sure they know you’re serious. This is where your goals do align. Salespeople hate time-wasters. So make it clear you’re not. If they show you the right home at the right price you will buy.  Keep them aware you’re using other agents. If there’s one thing salespeople hate more than losing money it’s losing to someone else. This will help you recruit them to convince their client your offer is a good one.

You want to buy a house and they want commission. Until you absolutely walk away or someone else buys the house there’s always a deal to be done.

How To View Property 

Turn the tables and try to get as much information as possible about the seller. Double check their asking price. How soon do they want to move? How long have they lived there? What repairs have been done? If you spot faults ask about them. You need to find an edge that you can use during negotiation.

If you detect a need to get out of the property, your position has been strengthened. If the owners have been resident for a long time it’s possible they have lots of equity and lower offers might not seem so bad to them.  Allow the broker to highlight the good features of the house but stay neutral in your opinion. And whatever you do don’t give anything away about your thoughts about the property. As soon as the broker knows you’ve fallen in love with the property, it’s game over.

Treat every viewing the same. Same questions. Same emotional response. You want to keep the broker on the back foot – the longer they have to deal with you the more impatient they’ll get in wanting to get some sort of deal done.

You’ve Found Your Dream Home

You’ve found the home of your dreams and the broker is having a difficult time knowing what you’re intentions are. But you have to break cover at some point. And that’ll be your second or third viewing.  The broker will sense this could be the one so make your last viewing a long one. The longer time goes on the broker will have to ask you whether you want to put an offer in. This is critical – never make an offer without being asked for one. You need to stay in control.

Never make the offer there and then – go home to think about it. Expect a mythical buyer who’s desperate to buy to suddenly emerge. Call the broker’s bluff and leave. This is a classic tactic you shouldn’t fall for. Even if there’s a potential buyer, the broker still asked for an offer from you so there’s still a deal to be done. Don’t be pressured at this point.

Go home. Double check you do want the house and formulate your first offer. And it must be a low one – around 15% lower than the asking price. This will test the seller’s resolve and gives you lots of room to move up.

But when you make that offer you must justify it – i.e you think it’s a fair price compared to similar houses in the area.  Attach wide conditions like a long completion time. You can always concede on this late in the negotiations.  If your initial offer is turned down (which is probable) always wait for a counter offer. Your response is to then raise your price but by small increments less than any increment they move towards you.

Never agree to split the difference – this has the effect of making your offer jump too much. Stick to small increments – you’re edging your way to the point where the seller will accept.

Each offer needs to be justified to prevent the broker pressuring you:

  • you’ve spoken to your partner (could be spouse, adviser, parents) and they’re not comfortable with paying more
  • you’re still convinced your offer is fair value
  • you have two other properties in mind which will be cheaper.

And always be reluctant to move up in price. You’re the buyer. You’re doing them a favor.  You can always come back and say you found the money if you really want to revive the house purchase.  This may seem confusing or too much to take in. After all, many people don’t have much experience in negotiating. And some might be too impatient. But the results can be very profitable.

If you manage to get 10% off of a $500,000 property you’re saving $50,000 dollars.   So if you want to pay not a dollar more than you have to try employing some of these tactics for your next home purchase.

How have you saved money on home purchases? 

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