Buyers: Drive a hard bargain

NEW YORK (Fortune) -- Shim and Neesa Patel were ready to pounce on a brand-new home in San Diego early this year. It was a 4,300-square-foot Spanish colonial coming on the market for $1.2 million. But two months before the house became available, Shim, a 35-year-old engineer for Qualcomm (Neesa is 30), noticed that local home sales had more or less ground to a halt.

"It made me very uneasy," he says. The couple stood pat for nine months - and for about the same price, they're getting a place that's 1,000 square feet bigger.

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If you're purchasing from a developer, push especially hard. Unlike individual sellers, who are prone to get emotional and dig in their heels, developers cannot afford to wait. "Builders are doing anything to move their inventory, because it costs money to carry it," says Ivy Zelman, a housing analyst with Credit Suisse. "Free cars. Vacations. No closing costs. You name it. [They're discounting] anywhere from 6 percent to a third off the base price."

Take, for example, Larry and Wanda Grover, 66 and 60, respectively, who bought a 1,700-square-foot house last August in Culpeper, Va. Ryan Homes, the developer, knocked $10,000 off the $319,000 starting price, kicked in $9,000 for closing costs, and agreed to an upgrade of the master bathroom. "Maybe if I'd held out, I could have gotten more," says Wanda.

North of Sacramento, Pulte Homes recently agreed to part with a 2,700-square-foot four-bedroom home for almost 18 percent off the $497,000 list price, plus an additional $8,500 in credits. "I've never seen anything like it," says Lance Pagel, the realtor on the deal. "I recently point-blank asked one developer's agent what incentives she was offering, and she point-blank answered $80,000."

To compete with the big boys, sellers of existing homes are also sweetening the pot. Feel free to ask sellers to cover closing costs or several months of mortgage payments. In order for David Reznikow, 34, to get a buyer to sign on the dotted line for his one-bedroom Boston condo, he agreed to incur moving costs that the buyer would have to pay to get the current tenant out.

Retired insurance executive Ed Thompson, 72, hasn't had much luck selling his Estero, Fla., home. He's asking $799,000, but if prospective buyers don't start showing serious interest by spring, he may tempt them with a $45,000 golf membership and a new golf cart. Why not just cut the price? He explains that he's already come down $80,000, and going much lower would impact his friends' houses in the gated community. "It would be too damaging to take the money and run," he says.

As for the Patels, they'll be moving into a new home next spring that comes with a bunch of extras. Among them: three more sets of French doors, an extra dishwasher, a warming tray, built-in bookshelves and other upgrades they have yet to choose. Total value: $55,000. "We're happy," says Shim. "It's a scary market, but I think we got a good deal."

Lower your expectations

Drive a hard bargain.

NEXT: Consider renting

Step away from the exotic mortgage

Shop for a rate drop

Keep an eye on your equity

Reporter associate Doris Burke contributed to this article.

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