Maintain Your Leverage When Buying A House

It doesn’t matter how excited you are to buy a new home; you’re still handling a business transaction. Therefore, you need to be careful what you say and do during the process, so you can maintain the upper hand. Sure, there are times, like a seller’s market, when you won’t have as much leverage, but the more you have, the better.

Having leverage means the odds are in your favor for negotiating the best deal. Flexibility, a great agent, and the willingness to walk away from a deal put you in an excellent spot. Guard your opinions and don’t put yourself in a position where you need to buy within a restricted time frame. Remain strategic and avoid letting emotions take the lead.

Picture it this way — if you were haggling at your local farmer’s market, would you start by telling the vendor, “These apples look amazing, I’ll pay you double!” Of course not, so don’t do the equivalent when you’re house hunting.

A Quick Look At Leverage In Real Estate

Before you can understand how to maintain leverage when buying a house, you need to understand what it is. Basically, if you have leverage when you’re house hunting, it means you’re in a good place to get a better deal. However, the market conditions also play a role in how much leverage you get. 

For example, in a buyer’s market, you have the luxury of taking your time and being a little picky. You can also push harder with negotiations. But you only get to do these things if you don’t put yourself in certain situations that reduce your leverage (more on this in a bit).

Conversely, in a seller’s market, you won’t have as many opportunities for leverage, since sellers are usually more selective. You’ll need to be more strategic. Give yourself as much leverage as possible by focusing on factors within your control.

Two Types of Leverage

When it comes to business deals, especially buying a house, there are logical and emotional components. Therefore, you also get two different types of leverage. There’s the financial side of things, such as having more financing, money, or flexibility in your budget.

Then, there’s the emotional part, which ultimately comes down to your ability to remain unattached to a property in case you need to walk away. (Sometimes, the emotional leverage is the harder aspect to handle, especially for first-time homebuyers.)

Whether financial or emotional, having more options will increase your bargaining power. For example, more houses to choose from equals more leverage. If you have more money, time, or patience, you set yourself up in a stronger position to negotiate better deals.

Seven Tips To Maintain Leverage When Buying A House

Okay, so now that you have a basic grasp of what leverage is all about, how do you get it? Here are the primary ways to increase your leverage when you’re house hunting.

1. Prepare Your Finances Before You Start Searching For A Home

Show sellers that you are ready and serious by getting all your financial ducks in a row. Get pre-approved (not pre-qualified), which shows that a lender has already verified your income and credit, and they’re willing to work with you.

Throughout the house-hunting process, protect your credit. Check your credit reports and score, don’t open any new lines of credit or make large purchases. You don’t want anything to affect your loan approval or terms.

Save money for a down payment and your earnest money (deposit), which also includes closing costs, etc. Having cash on hand is another great way to show sellers that you are ready to negotiate and close the deal. Being financially ready allows you to act quickly when the right property comes your way, without compromising your budget or appearing unprepared.

2. Don’t Let Sellers Know What You’re Thinking

During a showing and open house, keep your feelings and reactions to a home hidden. This is the time to put on your best poker face.

Don’t let listing agents know how much you love a property or any other details that could compromise your position. For example, don’t tell the listing agent you really need to find a place within a month.

Plus, keep in mind it isn’t just what you say, it’s also how you act. Your body language can send signals to sellers and agents. If you’re smiling from ear to ear and gushing over every feature, sellers might think they can get a higher price from you. Find a balance — look interested, but also as if you’re ready to look at some more properties.

3. Hire A Skilled Real Estate Agent

Working with an agent is often more successful than contacting the sellers directly. A good agent can make buying a house a lot less stressful, but avoid dual agency as much as possible. (This is when the same agent represents the buyer and seller.)

The right agent can help boost your leverage considerably. Work with someone who has solid negotiating skills and knows the market and neighborhood.

4. Do Your Own Research

Even if you have an agent, it’s still wise to do your own research and have an understanding of the current market. Look at comparables in the area, what they’ve sold for, and how long properties are typically on the market.

This information tells you if a property is priced fairly. A home that’s been on the market for 100 days will likely be more open to negotiations than one that’s newly listed.

Also, look at the price history. Has the price already undergone several reductions? These are all factors that can help boost your leverage, so arm yourself with the right knowledge.

5. Be As Flexible As Possible With Time

Flexibility is one of the best ways to gain leverage in a negotiation. When time is on your side, there’s no need to rush. When you don’t have to get into a home within a strict time frame, you don’t have to agree to whatever terms a seller puts in front of you.

On the flip side, sometimes being able to close quickly is an excellent bargaining chip. For example, the sellers are in a hurry, and you have no reason to wait; it can move you to the front of the line.

No matter what, keep your timeline private to avoid giving any clues away to the seller. You never want to appear desperate.

6. Remain Strategic With Your Offer

Things like inspection contingencies and financing contingencies are common and often expected in real estate transactions. However, be smart when working on the offer with your agent.

If you overload it with too many requests, like sellers paying closing costs and including appliances and making a bunch of repairs, your offer starts to lose appeal. This isn’t to say don’t protect yourself, but try to maintain a balance between protection and staying competitive.

7. Always Be Ready To Walk Away

The ultimate leverage is being able and willing to walk away from a house if the deal isn’t what you want. You remain in the driver’s seat, and you won’t feel pressured to make a wrong move. 

Even when you find a house that you feel is the one, keep looking at properties. This way, if you end up walking away from the deal, you haven’t lost any ground in your home search.

You Want Leverage When You’re House Hunting

Buying a home is, first and foremost, a business transaction, and having good leverage often means you get a better deal. Although some factors may be out of your control, it’s important to maintain as much leverage as possible.

You can do this by staying flexible with your timeline, working with an excellent agent, and coming to the table prepared. The best thing you can do is avoid letting emotions take over and be ready to walk away at any time. When you maintain leverage during your home-buying journey, you set yourself up for a more successful purchase.

Related Guides:

• What Are You Willing To Compromise When Buying A Home?
• Six Things To Consider Before Buying Your First Home
• How To Evaluate Homes For Sale: What To Look For Beyond Curb Appeal