The Buying Process
Finding a Home
Making an Offer
Finding a Loan
The Right Price
Getting to Settlement
Historic Real Estate
1st Time Homebuyers
Foreclosures & Short Sales
In most negotiations, it is more effective to have a win-win situation if at all possible, or at least create that appearance. Particularly in a situation where the initial agreement isn’t the end of the relationship, the better strategy is to not play all your cards, nor to cause the other parties to feel that they are the only ones who have given up anything. Check “Establishing the Right Price” for background on list and offer price. This section isn’t meant as a treatise on negotiating but is instead intended to be about negotiating as it applies to buying a home in Mid-Maryland.
Initial Negotiations of the Contract of Sale:
First, don’t get caught up in the list price – it may not be realistic in today’s market. If the sellers are completely invested in how much better their house is than any other on the market and the house just isn’t, you may have to walk away or pay more than the house is worth. The initial negotiations will take into consideration that the price is just the starting point. Other factors to consider are:
- Settlement date and the possibility of doing a post-settlement occupancy
- Type of loan and a reliable loan officer and mortgage company
- Amount of deposit.
- Sellers’ need and wants.
- Terms of the loan and amount of down payment.
- Inspections – the seller would love to have no inspections at all
- Any closing costs paid by seller
- Any contingencies – a seller will probably prefer no house-to-sell or financing contingencies, or any others for that matter.
- How much you want a particular house.
It is most important for you as a homebuyer to consider your order of priorities for the terms of the contract. If staying below a certain price far outweighs any other considerations, there may be concessions you can make such as the settlement date, buying the property “as-is”, or giving up something you don’t care about. The sellers will probably have a much different priority list. Part of the offer strategy is to make you, your offer and your loan present well to the sellers and their listing agent so that they look more favorably on that offer. Every single negotiation is different, and communication and flexibility are keys to a successful one.
It is our policy to present your offer with their agent directly to the sellers, but that isn’t always feasible. If we can’t meet with the sellers, we’ll at least meet with their agent to present you and your offer. Trying to negotiate through a third person can be difficult, especially if the agent is also partially responsible for the price.
Keep in mind:
- There are no absolutes.
- Everything is negotiable.
- Life is imperfect and so are houses.
- Every single transaction is different.
- Some are more challenging than others.
We’ll develop a plan with you that will give you a good chance of success. At The Buyer’s Best, we believe that the most effective negotiating strategy is based on solid fact and how much you want a particular house. Factors we’ll use in our presentation are:
- Inventory – how many other homes are on the market like this one?
- Days on Market – what is the average and how long has this house been for sale?
- Homes sold in the area and price range, especially homes sold while this one has been on the market.
- Average selling price to list price in the area.
- History of this property, where did they start their pricing and has it dropped?
- Property condition
- What are prices in the area doing, going up or down?
- We may look at cost per square foot also.
- And of course, the all-important Market Analysis.
Once the initial offer is presented to the seller, several things can happen. The sellers can accept your offer or reject it if they feel it doesn’t come close to what they want, or make a counter-offer. There is often verbal negotiating at this point, but any changes in the counter-offer have to be approved by you in writing. You can accept, reject or counter the sellers’ counter-offer, and sometimes the offer goes back and forth several times until agreement is reached. Your written approval of changes can usually be accomplished by fax or email, or we may meet to discuss what is happening. Your Buyer’s Best agent is always available to answer any questions you may have about the process.
At a minimum you will want to have a general home inspection on your new home. You may be asking the seller to make repairs to things found in the course of the inspection, or notifying the sellers that there are repairs that need to be made under the terms of the contract. The inspections are often reality checks for you and for the sellers. Even the most conscientious seller may miss some maintenance on their home that turns up in the inspection, or not realize that something is broken that they’ll need to fix.
The original contract of sale will stipulate that “all mechanical systems must be in working order” unless you’re buying the property as-is. However, there can be gray areas in “working order”. For example, is an oven working if it heats to 500 degrees when set at 350? Occasionally the negotiations about the inspections may be more protracted than the original contract negotiations and be more difficult to resolve. You do have the right to cancel the contract if the seller won’t make repairs that you feel are necessary but in the vast majority of transactions, we will work through it to everyone’s satisfaction. Sometimes a seller may prefer giving money instead of making repairs, which is often a more satisfactory resolution than having the seller make the repairs, and gives you more control over those repairs.
Looking to the Future:
Someday you may want to sell the home you’re buying today so it is critical to look to that day when you buy. It has been said that the money you make when you sell is actually made when you buy. A recent study showed that homes purchased with the assistance of an Exclusive Buyer Agent resulted in 67% greater appreciation in value compared to a traditional purchase or buyer agent.