Getting to 'Yes' on a Home

You've hiked through miles of open houses and figured out what you can spend, what you need, and what you can live without.

And you've finally found a home that feels right.

Now comes the tough part - negotiating a price both you and the seller can live with, a process often complicated by the fact that this can be an emotional time for both sides.

But there are ways to negotiate this financial and emotional minefield.

Agreement on the selling price is the hardest part of her job, says Jill Andruss, an agent at Coast Newport Properties in Newport Beach, Calif.

How much you can negotiate depends largely on the temperature of the local market.

A few years ago, California real estate was a buyer's market, Ms. Andruss says, with prices declining. No longer.

Many homes in her market now go for the full asking price. And a seller's market has been in full swing in other US metro areas even longer.

But buyers haven't yet gotten the message, Andruss says.

"It's hard to convince some buyers they can't get a price concession" these days, she says.

The first step to buying a house you're crazy about is to make an offer.

Don't bid too low ...

In this market, you should offer the most you'd be willing to pay for the house, says Andruss, then be prepared to walk away.

The reason: "Buying a house is an emotional process.... If your spouse has fallen in love with a particular house, and you lose it over a few thousand dollars, you're never going to hear the end of it," she points out.

In a cooler market than Newport Beach, top dollar may not be necessary.

A good rule of thumb is to offer about 5 percent less than the asking price, says Marilyn Moran, executive vice president of the Greater Boston Real Estate Board. Less than that, and you risk insulting the seller.

Nothing requires the seller even to respond to an offer. So if you offer too little, you may be ignored.

Many brokers, in fact, advise sellers not to make counteroffers. That lets them keep their options open, in case a full-price offer comes in.

Andruss also warns against drawing out a bidding war too long. In some transactions, buyers and sellers may counter 10 times. But sellers often get annoyed by too many low offers and will stop coming down in price.

Her most important advice: Don't think of negotiation as a game to see how low you can get the seller to go. You could lose a home that would have brought years of enjoyment.

... Or too high

In a hot market, bidding wars can develop and drive the price even higher. The best advice then is to retreat to the sidelines - unless the house is an absolute "must have."

If so, be prepared to pay too much. There might not even be another bidder, only a game of deception to extract top dollar from you.

In general, act as detached and unemotional as possible. Be prepared to move on, even if you're in love with the house. The best negotiators don't let the other party know they're hooked.

And just as the three keys to real estate are "location, location, location," the three keys to successful negotiation are "information, information, information."

Arm yourself with as much as possible before you pull up to the table.

Find out sale prices of comparable homes in the neighborhood.

Know as much about the sellers as possible - especially whether they're on a deadline. If so, they may be willing to take less money. And if they're selling it because it's a money-pit, you need to know that, too.

When everyone agrees on an initial price, the brokers will write up a "purchase and sale" agreement, which sets a closing date and governs the transaction until then.

That contract should give you time to finalize a mortgage. And it should make the sale contingent on your approval of a home inspection.

The inspection (see story, below) opens the door to further negotiation with the seller. If it reveals serious problems, you can ask the seller to lower the price accordingly.

* Comments to evarts@csmonitor.com

Dealing for Dollars

* Know the sellers. Why are they moving? How much do they owe? Do they have a deadline? The answers help you make an attractive offer.

* Know the selling price of comparable homes.

* Generally, don't dock more than 5 percent off the asking price or launch a protracted bidding war.