7 Negotiating Tips for Homebuyers
Remember these tips during the deal-making process of your home purchase.
#1: BE QUICK ON THE UPTAKE
It is critical to respond to counteroffers as soon as possible and to avoid making a counteroffer with any term that is not truly a deal breaker. Delays in responding leave space open for another buyer to step in and create a bidding war, or even more likely, for the seller to perceive that other serious buyers might be out there. A seller's mere perception of a hint of a whiff of the scent of a potential bidding war is a homebuyer's number one nemesis, ratcheting up the possible sales price in the seller's head on an exponential basis.
#2: CUT IN THE MIDDLE (WO)MAN
When you want to ask or tell the seller something, always always always go through your real estate agent, who will communicate your request or concern to the seller's agent. I know it seems inefficient, but it is truly a rookie move to contact the seller directly. It's just not done, mostly because the terminology is tough to master and legally sensitive. Also, some seemingly innocent and minor changes to your agreement with the seller might create problems with your lender; your real estate agent is better equipped than you to see these red flags. You hired your agent, so use him/her! It will prevent the catastrophic misunderstandings (read: drama) that can result when you or the seller says something even slightly different than what you each actually mean!
#3: GAUGE THE SITUATION WHEN DEALING WITH A DEVELOPER/BUILDER
A lot of this talk about negotiating and price and terms, etc. may be moot when you're buying a newly built home. By and large, the builder/developer dictates the terms on which they will sell you a home in their community, and you either take it or leave it. The list price is the price you pay, though in many markets, developers and builders are willing to negotiate if they have a large amount of inventory.
The builder will have a standard contract with a standard required deposit, standard contingency removal or objection periods, and a standard set of disclosures that they make to every buyer. The larger the builder, the more set they will be in their ways and to their price. That said, it doesn't hurt to ask for concessions or upgrades. Furthermore, builders hate getting sued, so they generally try to create a standard contract that affords you most or all of the same protections your real estate agent would build into a contract for you.
#4: GET THE DIRT ON PENDINGS
When the sold comps aren't that similar or sold a long time ago, or there is a very similar pending comp, you can go nuts wondering what price the buyer of that pending comp agreed to pay for the place. Sometimes the listing agents of pending comps can be sweet-talked into giving up the dirt. Your real estate agent can call them up, explain the situation, and ask obliquely for contract price hints, like "Did it sell for over (or under) asking? About how far over (or under)? What was the list price to sales price ratio? And how much competition was there? Did you have multiple offers?" And you can also make some educated guesses; the longer it was on the market, the less likely it sold for the asking price. The opposite is true, too. If it went off the market really quickly, it probably sold at or over the asking price.
#5: CHECK THE COMPS
The more money you offer, the more likely the seller will accept. Your real estate agent only gets paid if the seller accepts, so you can see why some agents tend to include or emphasize the highest priced comparables, even if they aren't the most similar comps for your property. Ask your agent for a copy of your Comparative Market Analysis (CMA) and ask for the full MLS listing details of the several most similar comparables. That way, you can decide for yourself how similar they really are!
#6: MAKE YOUR REAL ESTATE AGENT WORK FOR IT
If you are competing with other wanna-be buyers for a property, your real estate agent's prep work and presentation of your offer can be critical to your success. Hopefully you interviewed several real estate professionals and hired one you can trust and know will go the extra mile for you. Always communicate with your agent to ensure you both are on the same page in terms of expectations and deal breakers.
#7: CRUNCH THE NUMBERS
Before you finalize your decision about how much to offer, have your mortgage broker run a monthly payment on your offer price and estimate your property taxes and insurance. Often, buyers inch up in price during the house hunt and in the course of formulating their offer, so it's important to have a final check on the exact monthly and annual obligations you will incur if your offer is accepted.
Also, if you're seriously debating between offering two different prices and are having a hard time making the decision, ask your mortgage professional to run the payment, taxes and insurance on both of the prices you're considering. You might be surprised at how small (or large) an impact a $5,000, $10,000 or $50,000 difference in purchase price has on your ongoing payments, and it may help ease your decision making between the two amounts you are thinking about offering.