Negotiate Your Best House Buy
I love to share articles I find interesting – I’ve added my 2 cents in italics…
Keep your emotions in check and your eyes on the goal, and you’ll pay less when purchasing a home.
Here are six tips for negotiating the best price on a home.
1. Get prequalified for a mortgage
Getting prequalified for a mortgage proves to sellers that you’re serious about buying and capable of affording their home. That will push you to the head of the pack when sellers choose among offers; they’ll go with buyers who are a sure financial bet, not those whose financing could flop.
This is so much the first step towards home ownership – any Realtor worth their salt won’t even take a buyer out until they are pre-approved and understand their budget and constraints. In the San Francisco Bay Area – don’t bother writing an offer until you have a pre-approval in hand – or proof of cash.
2. Ask questions
Ask your agent for information to help you understand the sellers’ financial position and motivation. Are they facing foreclosure or a short sale? Have they already purchased a home or relocated, which may make them eager to accept a lower price to avoid paying two mortgages? Has the home been on the market for a long time, or was it just listed? Have there been other offers? If so, why did they fall through? The more signs that sellers are eager to sell, the lower your offer can reasonably go.
The Caton Team also finds out the big picture so we can tailor each offer for the best fit. When faced against multiple offers – information is key and structuring your offer is imperative.
3. Work back from a final price to determine your initial offer
Know in advance the most you’re willing to pay, and with your agent work back from that number to determine your initial offer, which can set the tone for the entire negotiation. A too-low bid may offend sellers emotionally invested in the sales price; a too-high bid may lead you to spend more than necessary to close the sale. Work with your agent to evaluate the sellers’ motivation and comparable home sales to arrive at an initial offer that engages the sellers yet keeps money in your wallet.
The Caton Team will provide a buyer with a Comparative Market Analysis (CMA) when we sit down to write the offer. We take into account the current state of the market, what homes have sold for in the recent past, what they are going for now, and the amount of competition for each home. Try to maintain an open mind when writing your offer.
4. Avoid contingencies
Sellers favor offers that leave little to chance. Keep your bid free of complicated contingencies, such as making the purchase conditional on the sale of your current home. Do keep contingencies for mortgage approval, home inspection, and environmental checks typical in your area, like radon.
Contingencies are what protect the buyer. Talk closely with your Realtor on which contingencies should stay in and which you can omit to improve your offer. Each client and offer is different. That’s why it is so important to work with a Realtor you trust.
5. Remain unemotional
Buying a home is a business transaction, and treating it that way helps you save money. Consider any movement by the sellers, however slight, a sign of interest, and keep negotiating. Each time you make a concession, ask for one in return. If the sellers ask you to boost your price, ask them to contribute to closing costs or pay for a home warranty. If sellers won’t budge, make it clear you’re willing to walk away; they may get nervous and accept your offer.
This strategy works great when you are the ONLY offer. So much time is wasted by buyers who think they hold the reigns in negotiations. In the San Francisco Bay Area we have low inventory right now and high demand. Setting the stage for a Sellers Market. Each listing will entertain multiple offers. So it is best to write your best offer up front because chances are you will NOT get a counter offer or the chance to change your offer once submitted. It is imperative you work closely with a Realtor you trust. Each offer opportunity is unique and will require a new strategy.
6. Don’t let competition change your plan
Great homes and those competitively priced can draw multiple offers in any market. Don’t let competition propel you to go beyond your predetermined price or agree to concessions—such as waiving an inspection—that aren’t in your best interest.
Great advice. The Caton Team will not push our clients to do anything they are not comfortable with. I would rather change our purchasing strategy and shop in a different market or price point than overextend our clients reach just because the housing market is competitive.
Buyers must be aware that they cannot control the market or the volume of competition. All a buyer can do is educate themselves on the market, understand their budget and their max and shop within their parameters. Nobody said it would be easy – but The Caton Team does strive for a smooth overall experience.
By: G. M. Filisko
I read this article at: http://members.houselogic.com/articles/negotiate-best-house-buy/preview/
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Thanks for reading – Sabrina