How a Trusted Real Estate Negotiates Your Home Buy
A trusted Real Estate Agent Knows The Local Market
A trusted real estate agent keeps current with the local market and is your best advisor to help lead you during the negotiation process. Now is not the time to listen to your friend who recently bought a new home, or your sister, or even your mother. You need to trust the guidance offered by your realtor and allow him or her to help you construct a bid that is priced to get you want you want but also get the seller to agree to some concessions.
Days on Market
One of the first things your real estate agent will analyze is the days on market. In other words how long has this home been on the market. The shorter the home has been on the market, and depending on local market conditions, generally the better your offer should be. If the home you want has been on the market longer than 90 days it’s ok to present an aggressively lower price - but you should come in at least at around 90-95% of asking price unless your agent sees it’s way overpriced for the market conditions.
Be realistic With Your offer
If your offer is too low you run the risk of insulting the seller and having them flat out reject your offer completely. A good real estate agent has already looked at the comps (comparative homes for sale) and has done the research to guide you to an offer that is reasonable or that should at least elicit a reasonable counter-offer.
Base Your Offer on The Home Value and Not The List Price
Your real estate agent will do the work behind the scenes to review comps. This is as important as the offer. By validating the price through facts and figures, and not emotions, your agent knows whether the price is reasonable based on current local market conditions. This means similar homes that have sold recently will be studied and should be incorporated into the purchase negotiations. Comparable sales is the best tool to help you justify your purchase price. Once the comps have been compared, and you have adjusted for all the similarities and differences on the home you want to buy, then your price should be in the average of those compared homes. If your desired home has a special feature that would increase its value, say a gourmet kitchen with commercial appliances, then you need to adjust your bid upwards for that. Knowing how your home stacks up to the competitors helps you justify your purchase price. It’s a good idea to present your comparable sales data with your offer. This shows the seller you have done your research and it will be a more reasonable tactic to justify your purchase price.
Your Pre-Approval Letter
You want to show you are a strong buyer and can afford the home you want to buy. Your offer should include a pre-approval letter from a lender so the seller knows this is a real offer. You never want the seller to know that you can afford more than the home you are bidding on. For each home offer you should get a pre-approval letter from your mortgage broker or lender for the exact price of the house you are negotiating. Your lender will be happy to issue you a letter for each home you want to buy tailored with your down payment and financing terms.
Don’t Focus Too Much on the Home Price
There are many other considerations when buying a new home besides just the price. Closing costs can be around 10% of the purchase price. If you concede a little on purchase price and ask for closing help, you can use your savings for emergencies or to handle some small changes you want to make, such as painting or a new dining room fixture and some new flooring. Speeding up or pushing back a closing date also has some monetary value. When my sister bought her first condo, the sellers were building a new home and needed 3 months to close. By agreeing to a rent back agreement (closing on the house and the owner renting it back form the new seller) she was able to purchase her first home in a hot real estate market and get a sale purchase price break. These are all financial considerations that can make or break your purchase, especially if the market is hot with a low inventory.
Negotiating by Insulting the Home
Just because you want wood floors, and an updated bathroom, or a cement patio to keep the weeds out matters not to the seller. If you don’t like the carpeting and want to install wood floors that is not a negotiation tactic. Justifying your low offer to bring it up to how you, the buyer, wants the home to look will not matter to the seller. The best negotiation you have is during the home inspection phase, and with the closing costs.
Home Warranty
I always advise my home buyers to negotiate a home warranty with their purchase. This is especially important for first time home buyers. There’s nothing more frustrating than moving in and 30 days later the HVAC breaks. Having the seller pay for a home warranty gives you peace of mind for the first year. I would consider keeping it after the year is up. Many home sellers will pay for that because the cost is not a lot, between $400-$600 to make the sale.
When You Submit Your offer
There are three possible outcomes once you submit your offer.
The seller will accept your offer as presented in your purchase agreement
The home owner will counter offer by making changes to the purchase agreement
The seller will outright reject your offer without a counter proposal.
You must be prepared for any of these three scenarios. And remember, while emotions may be high on both sides, this is a purchase contract. You must be willing to walk away if you have an unreasonable seller or you cannot get the concessions you want. My advice, though, is not to be penny wise and pound foolish. if you’ve found a home in the neighborhood you want to live in, and are only a few thousand dollars away, don’t necessarily walk from a sale. The difference spread over 30 years could amount to only about $20 a month.
Linda Pelton Realtor® is a real estate agent in the Annapolis, MD area. With over 20 years of professional real estate experience, I have contacts that can help you sell or buy your home. These include lenders, lawyers, and title companies.
If you have any questions, such as how do you appraise my home, or how do I pay you to represent me when I am a buyer, please shoot me an email, or give me a call. I will be happy to go over all your concerns.