The dance begins: Negotiation to buy a home
You’ve found the home of your dreams. So how do you snatch it for the price you’re willing to pay? Making an offer is an art.
You could offend a seller with an unreasonably low price or reference out-of-date market information, says Bob Irwin, author of the book “Tips and Traps When Negotiating Real Estate.”
Of course there is no one, surefire tactic, but here are some common tips for gaining the upper hand:
—Learn about the seller’s situation.
Having a clear understanding of the seller’s big picture will help you determine how badly or quickly he or she needs to sell the home. That may indicate how much room exists to adjust your bid price, says Julie Reynolds, spokeswoman for Realtor.com.
Does the seller have a contingent offer on another home that depends on this deal? Are they selling to relocate for a job? Are they trying to avoid foreclosure? Is the family emotionally attached to the house?
A seller who owns the house without a mortgage may be able to accept a slightly lower price than an owner who has to pay off a hefty loan upon a sale.
—Research nearby sales prices.
It’s important to do your homework to find out how much comparable houses in the area are selling for and how many days they’re on the market. The more recent the sale, the better the benchmark. There are a variety of websites that offer this information, including realtor.com, zillow.com, and trulia.com.
—Survey the house.
Sure, it may look like the home you’ve always imagined you would grow old in, but be on the lookout for red flags that can lead to big problems down the road, such as black mold, cracked foundations or roof decay. You can ask the seller to price the cost of the repairs into the deal.
“At the end of the day, the house may not be worth it when you realize its true condition,” Irwin said. “Know what you’re buying.”
Don’t insult the seller with a price that is far too low, especially if the house has just been listed for sale. You don’t want to short-circuit negotiations from the get-go. Be realistic and offer a price below what they’re asking but above what they would balk at.
—Don’t be desperate.
No matter how small the selection, you shouldn’t decide that a particular house is the only one for you. By remaining detached you will be less likely to pay top dollar and will be in a better negotiating position.
Know what you can afford, and remember that you may have to put down a large percentage of the purchase price. A preapproval letter from a lender shows you are serious and able to come through on the deal.
—Negotiate closing and escrow costs.
Closing costs include things like city and county property taxes, attorney fees, title and insurance. This is an area open to negotiation that can save you a lot of money, but can also feel like an endgame in chess. If the seller doesn’t have an obligation to pay off their mortgage once the deal closes, they may be more likely to budge on this.
Ask for a reasonable period of time for a home inspection and title approval, as well as geological and pest reports. You may be able to use information from those reports to justify a lower price.< /font>
Meanwhile, find out if you are allowed a loan contingency in the contract that will protect you until the deal is closed.
“Buyers are often going into negotiations assuming that they’ll be able to renegotiate based on what inspections will show,” Irwin said. “It’s a buying strategy that many people use, and the seller may even expect that.”
—Strike while the iron’s hot.
Real estate is often highly competitive. Act quickly if the deal is good, or else someone else will. Visit many homes so that you’ll recognize what you want when you see it. Even in a slow market, it’s a bad idea to procrastinate.
—Consider a fixer-upper.
If you find you’re priced out of the market, you may be able to find a home in a good neighborhood that’s in poor condition. If you’re willing to put the sweat and a little more money into it, it could be worth your while.
The dance begins: Negotiation to buy a home
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