Once you find the house you want, you need to move quickly to make your bid. Your agent that you are working with should be able to help you on an initial offer.
Try to line up data on at least three houses that have sold recently in the neighborhood. Calculate the difference between the original list price and the final price of the homes sold.
If the average difference is, say, 5 percent below the asking price, then you know you can make an offer 8 percent to 10 percent below, leaving yourself a little room to negotiate. If you really want the house, don't lowball. The seller may give up in disgust.
Another factor to consider in determining your bid is whether the trend in recent home sales is up or down over the past year. For instance, if houses a year ago were selling at list, and recent ones are going at 3 percent below, then you might want to sharpen your pencil for your opening bid to just 5 to 8 percent below list.
There's no foolproof system for negotiating a fair price. More often it's better to work exclusively through intermediaries, such as a Buyers Agent. In general, don't let the other side begin to believe you are negotiating in bad faith or being deceptive -- any deal you eventually reach has to involve trust on both sides, and has to be a win, win situation.
Be creative about finding ways to satisfy the seller's needs. For instance, ask if the seller would throw in kitchen and laundry appliances if you meet his price -- or take them away in exchange for a lower price. Remember, too, that your leverage depends on the pace of the market. In a slow market, you've got some negotiating room; in a hot market, you may have none at all.
Make sure that everything is on paper. Verbal negotiations mean nothing. It really needs to be on paper with both sides working to the end, and coming up with a deal that is good for everyone. Some items that you might want to include in your contract negotiations would be:
1. contingent on obtaining a mortgage;
2. a home inspection that shows no significant defects. You always have 10 days to get this done and report back to the Seller with any discrepancies. If you don't get this done; you are accepting the house; as is.
3. a guarantee that you may conduct a walk-through inspection 4 days before closing. This last clause allows you to check the home after the sellers have moved out so that you have time to negotiate payment for repairs, just in case the movers cause any damage, or that big living room sofa was hiding a hole in the floor.
You also need to make a good-faith deposit -- usually 1 percent to 10 percent of the purchase price -- that should be deposited into an escrow account. You will be credited this money when the deal closes. If the deal falls through, you will get the money back only if you or the home failed any of the contingency clauses.
Now call your mortgage broker or lender and move quickly to agree on terms, if you have not already done so. This is when you decide whether to go with the fixed rate or adjustable rate mortgage. Expect to pay $250 or more for a home inspection and $300 or more for an appraisal of the home. Most other fees will be due at the closing.
If you don't already have one, look into taking out a homeowner's insurance policy, too. Ask for recommendations from friends, or your real estate agent. Most lenders require that you have homeowner's insurance in place before they'll approve your loan.
Ask to be present during the inspection, because you will learn a lot about your house, including its overall condition, construction materials, wiring, and heating. If the inspector turns up major problems, like a roof that needs to be replaced, then ask your agent to discuss it with the seller. You will either want the seller to fix the problem before you move in, or deduct the cost of the repair from the final price. If the seller won't agree to either remedy you may decide to walk away from the deal, which you can do without penalty if you have that contingency written into the contract.
About two days before the actual closing, you will receive a final HUD Settlement Statement from your lender that lists all the charges you can expect to pay at closing.
Review it carefully. It will include things like the cost of title insurance that protects you and the lender from any claims someone may make regarding ownership of your property. The cost of title insurance varies greatly from state to state but usually comes in at less than 1 percent of the home's price.
The lender might also require you to establish an escrow account, which it can tap if you fall behind on your mortgage or property tax payments. Lenders can require deposits of up to two months' worth of payments.
After all this rigmarole, the actual closing is often somewhat anticlimactic, though perhaps still nerve-racking. It's a ritual affair, with customs that differ by region. Your real estate agent can brief you on the particulars.
Overall, if you are using a licensed Real Estate Agent, they should be able to guide you through all the details of negotiating the purchase of a home. Don't let the internet fool you into thinking you can do all this yourself. This is just a glimpse of what it takes to buy a home. There are many more details invovled. Don't make the mistake of getting taken advantage of. Have a trusted source on your side; representing YOU.