The old saying is that in real estate, everything is negotiable. But is it really?
When you go to buy a house, you’re certainly hoping to get the best price and terms. To do that, you need to know when to start negotiating and when to stop. That begins with being familiar with the market, down to the neighborhood and maybe even the street.
If there are more homes for sale than people who want them, there is usually more room for negotiation than if there’s a shortage of inventory, as is the case in many desirable neighborhoods throughout the country.
“All those deals of the century are gone,” says Sheila Rugege Dantzler, a broker with Related Realty in Chicago. “The deal of the century is ‘I got a good property that meets my needs.’ If you get it, then you win.”
The pace of home sales has slowed since last year in many cities, and buyers are gaining a little more leverage. Plus, many buyers are dealing with sellers who don’t realize that home prices are not rising as fast as last year. That creates opportunities for negotiation on some homes – but not all.
“It’s definitely a seller’s market,” says Jordan Clarke, an agent with Redfin in San Diego. “Buyers have a little more breathing room, but they’re still not in the driver’s seat.” But some neighborhoods and price ranges are still hot, he says. In San Diego, for example, “If there’s anything under $700,000, it’s off the market right away.”
With home listings so accessible online, some would-be buyers may think they don’t need a real estate agent. It’s easy to find a house online, but it’s harder than it appears to get from offer to closing. A good agent, with knowledge of the market and negotiation experience, can make the difference between a successful purchase and a deal that falls apart. In most cases, buyers pay nothing to use an agent because real estate commissions are covered by the seller.
“This will probably be the single largest purchase that you’ll ever make,” Dantzler says. “You need a trusted party negotiating on your behalf.”
Learn about everything from credit scores to home inspections before starting your home search.
Here are 12 tips for homebuyers to get the best deal.
Get your finances in order before you start looking for a house. Your offer is much less persuasive if it doesn’t include a mortgage preapproval. Dantzler won’t show homes to buyers until they are preapproved, and sometimes that process can take several months.
Do the math before getting too hung up on small price differences. At an interest rate of 4.3 percent, the difference between $195,000 and $199,000 is $19 a month. Don’t get stubborn and lose the right house because you had to win.
Base your offer on the home value, not the list price. The recent sales in the neighborhood give you and your agent ammunition and information. If a home is priced at or below market value, you’re unlikely to get it for less. If it is priced above market value and has been on the market for a while, a lower offer accompanied by a market analysis may get you the home. This is where a good agent can be invaluable.
[Read: 7 Homebuying Mistakes to Avoid.]
If you see a home you like, be prepared to move fast. “When properties go on the market, they go very quickly,” Dantzler says. If you’re in a competitive market, make your first offer your best offer, advises Brendon DeSimone, a real estate broker in New York and author of “Next Generation Real Estate: New Rules for Smarter Home Buying & Faster Selling.” And if you take too many chances, you might strike out. “There will always be people who want to make a lower offer,” Dantzler adds. “When they miss out on the first or the second or the third property, they learn their lessons.”
Don’t assume that the inspection will allow you to reopen negotiations. It’s certainly acceptable to ask for a credit if the inspection reveals major problems. But in a tight market, you may not get it. These days, it’s unlikely that a seller will make significant repairs, and you’re better off asking for a credit at closing so you can hire your own contractors. In some hot markets, prospective buyers do an inspection before making the offer so they can submit an offer with fewer contingencies.
If you don’t ask, you don’t get. Even if the market is tight, feel free to ask for repairs or other concessions, but understand that you won’t get it all. “Once you’re in escrow, you have the power,” Clarke says. He advises waiting until the end of the inspection period to make your requests. “The more you ask for, the better your result is going to be,” he says. “One-fourth of 100 is more than one-fourth of 50.”
Find out why the seller is moving. The more you know about the seller, the more you can tailor your offer. Does the seller already have a new place and want a quick closing? Is there a divorce involved? Does the seller not have a new place and therefore would prefer a longer closing or even a rent-back agreement? “You have to ask a lot of questions of the listing agent and the seller,” DeSimone says. “The more you know about the seller, the better strategy you can put together.”
Use public records and online real estate listings to do research. Focus on gathering information about the seller, the property and the neighborhood. You can find out if the house is in foreclosure, whether the seller is party to a divorce proceeding, see the Google street view and determine whether the house has been on the market before and at what price.
Redfin, Zillow, Trulia and Realtor.com offer different tools, so look at the property and the neighborhood on all of them. “The more information you have as a buyer, the more confident you’re going to be,” Clarke says.
Expect to compromise. No matter your price range, you won’t find a perfect house. You’re likely to have to compromise on features and probably even on the big three: price, size or location. Enter your negotiations prepared to compromise, and you’ll be a step ahead.
Don’t get hung up on decor. There are a lot of things about a house that can be easily changed, including appliances, countertops, carpeting and dated window treatments. Let the little things go.
Remember that terms can be as important as price. That could mean removing inspection contingencies, making a bigger down payment, accepting the contents with an estate sale or changing the closing date to accommodate the seller. “The fewer contingencies you have … the more likely you are to get the house,” Dantzler says.
Consider writing a personal letter with your offer. Clarke includes letters and photos of the prospective buyers with most offers. “It puts a face and a picture and a story,” he says. “It’s not just another offer the sellers are looking at. It’s a person. It’s a family. … People want someone like them to enjoy the property as much as they did.”
Weird Home Features That May Confuse Homebuyers
What your home says about you might not help it sell.
Giving a home a personal look and feel is important to many homeowners, as it not only makes you more comfortable but also provides a sense of ownership. But that all
goes out the window when it comes time to sell your home. Suddenly, those custom design
touches can be a liability in attracting interested buyers or getting the sale
price you’re hoping for. Real estate agents weigh in on home upgrades that
might make potential buyers scratch their heads, and how sellers can work around them.
This ultimate finishing touch to a man cave bathroom might get a few
stares during home tours. But having a urinal shouldn’t keep people from buying the house,
says Greg Cooper, manager and broker at Berkshire Hathaway Home Services in
Indianapolis. “You’re catering to 49 percent of your audience here, so people
just kind of stand there like, ‘Wow, don’t see many of those,’” Cooper says. “I
don’t know if they’re put off by it – they just kind of think it’s maybe
Nods to history
Especially if you have an old home, you might be inspired to return the interior to its 19th-century glory days, complete with a wood-burning stove and a soaking tub in the kitchen. Doing so could leave you with a limited buyer pool, but marketing the home as historically authentic could make the sale a success. “As long as people know what to expect when they’re walking in, they know it might be a house for them. It’s not so much a turnoff as a preference,” says Joanna Williams, managing broker for Better Homes and Gardens Real Estate Kansas City Homes in Liberty, Missouri.Secret rooms
A hidden passageway might sound like a fun idea – or a safe
one if you’re adding a panic room – but be sure it
doesn’t come off as creepy when you put your house on the market. Make any
hidden rooms or security spaces fit with the floor plan, recommends Jeff Knox,
owner of Knox & Associates Real Estate Brokerage and author of a blog focused on the Dallas real
estate market. “If someone converted a closet into a panic room and tried to
hide it, it looks way out of place, and that would turn somebody off,” he adds.
Watching the game wouldn’t be complete without the
memorabilia of your favorite team adorning the TV room as you cheer them on, right?
Before putting your home on the market, you might want to neutralize a
sports-themed room to avoid distracting buyers, especially die-hard fans of
a rival team. “You don’t want to sell an Alabama room to an Auburn fan, or a
Michigan room to an Ohio State fan,” Cooper says. Downplay as much as you can,
especially if the furniture and walls sport the team logo as well. “We always
recommend they take the stuff down, and at least if they insist on leaving it
up, just a couple items as opposed to the entire space,” Williams says.
Custom installations inspired by loved ones
You love your family and friends a lot, but a permanent
installation reminding you of them, such as a spouse's likeness on the wall or each family member's handprints adorning the front walkway, will be a difficult sell for anyone else. Cooper recalls touring a home that had a custom marble tub modeled
after the seller’s first wife’s backside. “I can’t imagine getting in that tub
if you’re anybody but her,” he says. The chances a buyer will be OK with keeping
such a personal element in the home are slim. It also serves as a distraction, so
replacing it before the home goes on the market might be best.
Whether it’s for more space or to create the
custom theme room of your dreams, converting your garage is going to take a
toll on the value of your home. Knox says most buyers want a garage, and they certainly
don’t want one that’s been altered lackadaisically. “A lot of times they’ll
halfway convert the garage so it looks clumsy. They will drywall it in, but
leave the garage door, or they’ll drywall the inside of the garage door, but on
the outside it’s still a garage door,” Knox says.
Rooms inspired by Pinterest
Increasingly, Williams says she and her colleagues have
to talk to sellers about the room they overhauled entirely with Pinterest tutorials. While
an attempt to save on redecorating is more frugal than paying a professional, if you don’t know what you’re
doing the results can be disastrous. “There’s some tasteful things that can be
done, but there can be also far too much Pinterest being done in there,”
Williams says. Especially for floor and wall treatments, consult a professional
first to avoid it affecting your sale price.
Cabinets for your kooky collection
A spare room is the perfect place to beautifully display the
collection of action figures, stamps or artifacts you’ve been accumulating for
years. But be careful when it comes to selecting custom cabinetry to house your prized possessions. Cooper says as long as cabinets don't affect
primary rooms for buyers – master bedroom, master bath, kitchen,
living room and dining room – they shouldn’t lower the value. But if
the displays don’t match the architectural style of the house, Knox says it can throw off buyers since they know they’ll have to remove or replace them. “Very contemporary
cabinets in a traditional home will kill it,” he says.
Built-in fish tanks
If your aquarium is custom made for the area it takes up, it
could pose a bigger challenge to the sale of your home. A fish tank will only
be appealing to those that have or want fish, but anyone else will view it
as something to be taken out and a space that needs decorating. “If you find a fish lover, that’s all well and
good, but if not you’re probably going to want to take it out, and that
involves removing it in some way and finishing the area that tank took up,”
Cooper says. “Not a crisis, but there’s effort involved – and money.”
We all knew something like this was coming. Whether it’s for exercise or weekend parties, a stripper pole in your home will be a major distraction for potential homebuyers. Williams explains a stripper pole keeps a potential homebuyer focused on who the seller may be, rather than what the home itself offers: “You want to be as vanilla as you can whenever somebody is looking at your house because they want to picture themselves into it. And [a stripper pole] absolutely is making a statement about your lifestyle.”Read More
Devon Thorsby | June 5, 2019
Homeowners should not fret, as long as they're prepared for the possibility of a downturn.