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Real estate is one of the few places in American life where negotiation is the rule rather than the exception. It takes a keen understanding of the homebuying process to be good at negotiating. Be sure you have it down before you make any offers on homes.

Recognizing that shrewd negotiation doesn't come naturally to most people is the first step in becoming a good negotiator. Here are tools and information the best negotiators use.

The most important factors in effective negotiation are:

Information     Preparation     Realism

Information
CMAs--Comparable Market Analyses
Once you've found a home you want to buy, the first step in negotiation is to get the fair value. Your real estate agent has access to Comparable Market Analyses (CMAs), which show you what similar properties have sold for. Generally, CMAs list houses in a particular location that are currently on the market, have sales pending, have expired from the market or have sold. It is the "sold" properties you need to look at. What a house is on the market for or has an offer for doesn't mean that's what it will sell for. There can be a big discrepancy in the two figures.

The CMA often gives you general information about the houses being compared: number of bedrooms and baths, square footage, the listing price and the sold price. Make sure the CMA focuses on houses similar to the one you've selected - both in description and location. Also, the more recent the data, the better.

Condition
Once you have the CMA, drive by all of the properties listed in the "sold" column. Condition has a lot to do with the ultimate selling price of a house. Does the home in which you're interested shine above or fall below those sold? Make a realistic comparison of condition, then adjust your thinking up or down according to what you see.

Extra amenities
Does the house you've chosen have more or fewer amenities than comparable homes? Although amenities won't affect the value as much as location or condition, they can be a factor. Be wary, though. An outdoor hot tub may have been a major motivating factor in your choice of a house, but it won't add much to the value of the property.

Motivation
A good negotiator gathers as much information as possible on the house and the sellers. The seller's reason for selling is at the head of the list. Has to sell? Wants to sell? Just throwing it on the market at a high price to see if it'll move? If your agent represents you in the transaction as a "buyer's agent," they can try to secure this information for you. If you're working with an agent representing the seller, they typically can't disclose this information without the seller's consent.

Preparation
Great negotiators always prepare themselves. The most important factor is your emotional frame of mind. Never let emotions override common sense. Excitement is normal, but keep it in check during negotiations or you'll lose the value of the information you've gathered.

In addition to your emotional frame of mind, your finances should be in order. An offer carries more weight if there are no dangling financial problems and if you're prequalified for a mortgage.

You can't be afraid to let the house go. Convince yourself that if the price isn't to your liking or is outside your budget, you'll walk away. Set a realistic limit and stick to it. Overpaying for a house is epidemic among buyers who let their emotions rule their better judgment. It's a mistake you'll regret every 30 days for years to come.

Finally, organize your information and have it readily available.

Realism
Don't throw away all your information gathering and preparation by making a ridiculous offer on a well-priced home. Nothing turns a seller off more than a low-ball offer on a house that is realistically priced. Often, negotiations will stop, rarely to be revived again.

An example: Mr. and Mrs. Buyer find the perfect house after looking for months. The house is listed at $155,000. Mr. and Mrs. Buyer have a CMA that shows average selling prices in the neighborhood to be $148,000 to $153,000. Ignoring the CMA, they offer $120,000. Mr. and Mrs. Seller, annoyed at the low offer, counteroffer at full selling price, $155,000. The Buyers, still wanting to "steal" this house, make a second offer of $125,000. The Sellers, very frustrated, don't move from their $155,000 price. Suddenly, there is word that another offer is forthcoming to Mr. and Mrs. Smith. In fear of losing the house, Mr. and Mrs. Buyer up their offer to $154,000 and the Sellers accept. A realistic first offer in the $150,000 range (remember, the CMA showed $148,000 to $153,000) may well have been accepted by the Sellers. If this were the case, the Buyers paid $4,000 more than they had to.

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