Tuesday, September 17, 2019 / by Steven DiPeso
You've spent weeks and months with our team filtering thru properties on the market. After touring and inspecting those properties on your short list you've found "the one" that you would like to purchase. It's now time to draft the offer- but where is the beginning point on your first move? Well, like my go to answer in Econ 101- that depends.
The absolute first step to commencing negotiations (such as putting forth an offer) is to gather the facts. Is the home you intent to make an offer priced at market or is it above or below market; and if so, to what extent. Where are current inventory levels compared to prior periods? Has the property been on the market near the average days for sale as other similar properties or is below or above the average? Is anything excluded from the sale, or do we believe material repairs are required?
Similarly, what are the facts of our buying clients.... Do you need to include a contingency in your offer? If so- your ability to push on price may be more difficult than a buyer with no contingencies. Are you a cash buyer (we trust not at these rates!) and willing to close quickly?
These facts lead us to determine a fair transaction price. Generally, we will then submit our offer, slightly below our target price leaving room for potential seller counters (as well as some negotiable terms in our back pocket). Ideally, and with our extensive experience in negotiations most often, sellers agree close to our target purchase price. In certain instances where too large a spread exists, or where our buyers seek a little extra gain- we focus on securing seller concessions listed below.
Negotiating home repairs is something we are quite familiar with. After the home inspection, when the homebuyer receives the inspector’s report, negotiations often begin anew.
Understand, however, that no home is perfect; even newly-constructed homes can have problems. Don’t sweat the small stuff – save the negotiations for anything major that needs repair or replacement.
This is especially true if the problems are in one or more of the home’s major systems, such as HVAC, electrical, plumbing or with the roof or foundation.
We can negotiate for a price reduction, closing costs credit or for the repair work to be performed by the seller before closing. The first two options (price reduction or credit towards closing costs) are preferable, as they won’t typically delay the closing.
Plus, there is no way to guarantee the repair work, if performed by the seller’s contractor, will meet your standards.
2. Closing costs
With a mortgage comes a requirement to pay a down payment and closing costs. The latter includes all the costs of obtaining the loan, such as lender fees, notary fees and more.
While sellers are under no obligation to do so, many buyers negotiate with the seller to pay all or part of their closing costs.
It’s an easier pill for the seller to swallow if:
Your offer for the home is at full asking price
You intend to keep your request for repairs to a minimum. If the seller has to pay for a laundry list of requested repairs, he or she may not be amenable (or have the funds) to assist with your closing costs.
You put some skin in the game as well, by paying for a portion of your closing costs
3. Personal property
Anything that isn’t permanently affixed to the home or land (real property) is considered the personal property of the homeowner. Personal property that we commonly negotiate over for our homebuying clients include:
Appliances, such as refrigerator, washer, dryer
Buyers, however, have negotiated for furniture, pool tables, artwork and even the family pet.
4. Closing date
The closing date – the day on which the home becomes yours – is negotiable. This is important to know for several reasons:
If you are trying to time the closing of your current home to be simultaneous with the new home’s closing.
You need more time to find another home
You are relocating and need to be in your new city by a certain date
If your schedule doesn’t conflict with the seller’s this is often a successful negotiation.
5. Home warranty
If a home warranty is something that you desire, it’s possible to ask the seller to provide you with one – at least for the first year of home ownership.
Basic coverage varies by region and company, but commonly includes coverage for:
- HVAC systems
- Kitchen appliances
- Roof leaks
While the above is only a partial list of commonly negotiated items in a home purchase, it outlines the ones we see most often.
Feel free to reach out to us if you have questions on this or any aspect of the home purchase process.