Purchasing a house is a financial and emotional investment. Even after finding the ideal home, the home price negotiations begin, and for the last two years–it’s been a sellers’ market. According to RealtyTrac’s Year-End 2015 U.S. Home Sales Report, “The 11 percent average price gain in 2015 marked the second consecutive year where U.S. home sellers realized an average price gain following six consecutive years where U.S. home sellers realized average price losses.”

There are many factors affecting both a home’s value and the seller’s desired price, and buyers need a keen, experienced negotiator at their side to differentiate the two—namely, their real estate agent.

Here are 3 important factors a real estate agent considers when navigating home price negotiations:

A home’s “face value”

A homebuyer will always have an intuitive sense of what a home is personally worth to him/her, its face value. When determining a home’s face value, it’s essential to take the time to consider the pros and cons of the property before putting in an offer. For example, does the home’s curb appeal instantly draw you in, or does it leave something to be desired? Does the layout of the home fit your lifestyle–compartmentalized and cozy or a modern, open floor plan? Are there obvious, upgrades that are needed, such as removing the carpet or updating kitchen appliances? Is the commute convenient and affordable?

A real estate agent will provide a Comparative Market Analysis (CMA) which analyzes similarly-priced local homes and recent home sales. It may be that those houses are a better fit–perhaps newer appliances, a meticulous exterior or a superior school district, as examples, and have a similar price. When negotiating, it isn’t always about undercutting the asking price. The seller may accommodate you by making some of the desired upgrades as part of the negotiations. That’s where a savvy real estate agent can step in and lever the pricing in your favor so it aligns with your view of the home’s face value.

The motivation of the homeseller

If someone is selling a house, it is important for a buyer to understand why. The seller’s motivation can be another important factor in home price negotiations. There are so many reasons why a family may be choosing to sell their house, and some may prompt a quicker closing or more flexibility on price. Examples of circumstances that may favor the homebuyer include when a seller:

• desires to build new construction
• needs to relocate due to a change of job
• wants a higher-quality school district as children move into middle school and high school
• owns a large house and children leave to go to college

When a seller is motivated to close quickly, a buyer may have more room to offer a discount to the asking price. Given the circumstances surrounding the sale, your real estate agent can give you some important insight and guidance when determining a reasonable offer during the home price negotiations.

Current real estate market conditions

The conditions of the real estate market, both nationally and locally, will invariably impact the price negotiations surrounding a home sale. With national trends in the U.S. real estate market favoring sellers and home prices projected to rise about 5% in 2016, many sellers are listing homes above market value.

But local markets will often tell a different story, and buyers must be well-informed. Cities and towns can have home values that differ greatly from national trends. For example, Movoto.com reports that over the past year in South Orange, New Jersey, median list prices have decreased from $759,000 to $725,000 and inventory has increased, signaling potential opportunity for astute homebuyers. Price negotiations might be a bit more difficult in Maplewood, NJ, with average list prices climbing over the same period.

Housing prices can also be impacted by the relative frequency of real estate transactions in the neighborhood. In our area, proximity to Midtown Direct, a popular commuter rail line into New York City, and area schools affect home values. It’s even worthwhile to look at demographics such as the presence of older residents who may be more apt to move as opposed to entrenched young families with children in the schools.

Home price negotiations are a complex process, and the right real estate agent can be an incredible advantage. When negotiating a new home purchase, have an experienced expert by your side!

I’m Victoria Carter, the leading real estate agent in Northern NJ, and it’s my passion to connect homebuyers with the right houses at the right prices. With 20 years of experience, I know the local markets and how to astutely navigate home price negotiations. If you’re interested in a home in any of the many vibrant northern NJ cities or towns, including Summit, Short Hills, Millburn, South Orange, or Maplewood, call Victoria at (973) 220-3050 or email me at victoria@victoriacarter.com. I’d love to assist you!