How to Negotiate Price Down by Six Figures

  • Ryan Rogers says home buyers can take advantage of the current real estate market.
  • High interest rates have impacted home prices, allowing buyers more negotiating room.
  • Rogers recommends looking for properties that have been on the market for more than 30 days.

US mortgage rates have been on a gradual downtrend since early March, hitting an eight-week low on Monday. The 30-year fixed rate averaged about 6.62{b5e4caabb46945dac267f6fa1789e0b2b1831cce91f79b27f72a0de22e4bb018} on Wednesday, down from peaks of above 7{b5e4caabb46945dac267f6fa1789e0b2b1831cce91f79b27f72a0de22e4bb018} during the last quarter of 2022.

With rates still relatively elevated, many would-be home buyers believe that they’re at a disadvantage. But nothing could be farther from the truth, according to Ryan Rogers, a 23-year residential real estate agent with Douglas Elliman in Austin, Texas.

It’s sellers who are taking the hits, he said. Specifically, those who haven’t adjusted to the new normal and still hold unrealistic expectations for what they think their home is valued at. Since the start of the year, he has noticed an increase of properties that have been sitting on the market for 30 to 60 days. This made it easier to negotiate a better deal, he added.

“We’re seeing a lot of repricing and when you look at what’s currently on the market and what’s sold in the last 30 to 60 days in a specific neighborhood, most of the time, I’m noticing in our specific market, probably somewhere between six to as high as a 10{b5e4caabb46945dac267f6fa1789e0b2b1831cce91f79b27f72a0de22e4bb018} sale-price reduction from the price which they started to the price in which it closed,” Rogers said.

For example, a single-family three-bedroom, two-bathroom home in Austin, Texas had been on the market for about 90 days after it was initially listed for $779,000. The seller eventually reduced it to $725,000, Rogers said. But that was still too high. By the time he closed at home for his clients in January 2023, it had sold for $650,000, a $129,000 difference, he noted.

The number-one factor that made this steep price drop possible was that it had been on the market for three months, he said. The second factor was that they made an all-cash offer which could be closed quickly. Finally, he had to educate the listing agent on why the price was too high relative to the neighborhood comps, something Rogers says he has been doing a lot more recently.

He added that he’s going as far as requesting additional items like furniture. If it’s a waterfront property, he’ll request the boat docks and other recreational items, which wasn’t possible only a few months ago, he noted.

Taking the advantages

As early as seven to eight months ago, buyers were bidding 10 to 15{b5e4caabb46945dac267f6fa1789e0b2b1831cce91f79b27f72a0de22e4bb018} above the ask to secure a property, he noted. For example, a list price of $500,000 would be sold for $575,000. Today, that same house could be going for $490,000 or 480,000. So yes, the interest rate is going to be higher, but when you look at the payment difference, it’s not a huge delta, he added.

Unlike the purchase price, your mortgage rate can also be adjusted at a later date. While there’s no guarantee banks will offer lower interest rates anytime soon, they are expected to slip below 5{b5e4caabb46945dac267f6fa1789e0b2b1831cce91f79b27f72a0de22e4bb018} and remain less volatile this year, according to Nadia Evangelou, senior economist and director of forecasting at the National Association of Realtors.

Many lenders offer a no-closing cost refinance program, which allows you to refinance a mortgage without paying closing costs, he added. However, it’s important to note that these costs could be translated into a higher interest rate.

Meanwhile, buyers could take advantage of this window by nailing down the best deal possible.

“I would recommend any buyer ask their real estate agent to filter by days on the market and only look at those that have been on the market for 30 days or longer because that seller’s motivation may be higher than a brand new listing,” Rogers said .

Once the seller’s motivation has increased, additional terms could be negotiated such as, the seller could pay closing costs, something that has been more common in the current environment, Rogers noted.

Plus, not every homeowner needs a 30-year fixed mortgage. Younger buyers don’t often live in a home for more than seven to 10 years, he said. A shorter-term loan can help you nail down a lower rate.

“So I have a conversation with buyers and say, look, instead of a 30-year fixed rate with a 30-year amortization, why don’t you look at a 7-year ARM?” Rogers said. “You may be able to save a little bit of money and then it still has a 30-year amortization. But if you can save a little bit on the rate and then combine that with seller-assisted closing costs to buy that rate down even further, that could be very advantageous.”

Look for homes that have strong resale value. He always recommends buying property as close to the downtown core as possible if it’s a major city or at least close to a large shopping district or entertainment area. These areas are more likely to always be in demand.

On the other end, be aware of buying into new projects in areas where there’s lots of residential construction, he said. Your property may be harder to offload later on. This is because when you initially purchase from a builder, they offer various incentives, such as covering the closing costs or adding free upgrades. If you have to put your house on the market after a short period of time, you’ll be competing with the same incentives that initially influenced you to purchase your property. The resale market can’t compete with builder’s incentives, he added.

Finally, don’t go into a frenzy where you view 20 houses. While that’s ok, he recommends narrowing it down to two or three of your favorites and then making an offer on the one that has been on the market the longest. You’ll probably be able to get a pretty good deal, he said.