HOME SALE NEGOTIATIONS
Home Sellers Want the Highest Price and Home Buyers Want a Deal.
How Can They Ever Find Common Ground?
THE TUG OF WAR BEGINS!
The foundation for any negotiation starts with the data, the black and white of it all. Then it becomes a dance of personalities, emotions, and skill.
At the end of the day, Sellers want to sell and Buyers want to buy and both have the goal to close the deal. It’s the in between that can get a little murky along the way.
In every market, one party has the upper hand; in a Buyer’s market, there are lot’s of choices and it can be easy for the Buyer to walk away in favor of the home down the street. In a Seller’s market, inventories are tight with limited choices, which can create multiple offers or bidding wars and the Seller can be picky about the price and terms.
Typically, in any kind of market, a truly motivated Seller is less inclined to want a lengthy negotiation, they just want to get the deal done.
TOP 10 THINGS TO KNOW WHEN YOU’RE
NEGOTIATING YOUR NEXT REAL ESTATE DEAL
PRICE – it means different things to different parties. The Seller wants the highest price and the Buyer wants to pay the least amount possible. They don’t want to overpay or price themselves out of a resale when it comes time for them to sell.
CLOSING COSTS – Buyers will pay the prepaid closing costs for their mortgage. Items like taxes and insurance. The Buyer might ask for a flat amount paid by the Seller to go towards their closing costs; up to 3% of non-recurring closing costs are allowed by the lender. In this case, if the Seller is asked to make a concession, that will typically end up in a higher sales price for the Buyer.
CLOSING DATE – Sellers may want to get out from under the monthly costs as quickly as possible to preserve their capital. Buyers, when getting a mortgage will pre-pay the first month’s mortgage payment so they don’t have to make their 1st mortgage payment until the 2nd month, in this case, the Buyer will likely want to move in at the beginning of the month so they can skip the next month.
FINANCING CONTINGENCIES – Buyers who are getting a mortgage are competing with all cash offers, which is more appealing to any Seller knowing that there isn’t a financing contingency. The best way for a Buyer to compete is to get complete loan approval prior to making the offer, that way they can move quickly to remove or waive the financing contingencies.
APPRAISAL CONTINGENCY – If the Buyer is getting a mortgage, the Seller can push the Buyer to waive the appraisal contingency. On a conventional mortgage, banks will lend 80% of the appraised value or the purchase price, whichever is lower. But if the house doesn’t appraise for the contract purchase price and the appraisal contingency has been waived, the Buyer must come up with the difference. Any shortfall would have to be paid in cash by the Buyer.
HOME WARRANTY – The Home Seller will typically provide a one year home warranty that covers the mechanical’s, appliances and pool equipment. This is a “Peace of Mine” insurance policy for the home seller in case something goes wrong.
LEASEBACK – The Seller may need a little extra time to make the move, especially if they’ve lived in the home for many years. The Buyer could offer a zero cost rent back for 30 days to entice the Seller to accept a price that they may not otherwise accept.
REPAIRS – When a home needs a lot of updating, the Buyer has a lot of room to negotiate if the home is priced on par with properties that are updated. If the Kitchen and Baths are out of date, the appliances are old and there’s popcorn on the ceilings the Buyer will make a lower offer to accommodate the repairs necessary. The Seller can price the home accordingly ahead of time and say they won’t make any repairs, in this case, there will be less room to negotiate on price.
FURNITURE – Negotiation over personal property such as the furniture has killed more than one deal, this is when emotions can get heated. It’s best if the Seller will consider selling the furniture to make out a list of items and their prices ahead of time. An important note here, a lender will not lend on personal furniture. If there will be personal property transferred it must be done outside of escrow with a bill of sale.
APPLIANCES – The stove, dishwasher, built-in microwave and any other built-in appliance will be included, but a free-standing refrigerator or the Washer and Dryer don’t necessarily. Seller many times will wait to see how the negotiation goes first before they commit.
INSPECTION CONTINGENCY – Buyer’s remorse and waiving their home inspection contingency generally go hand in hand. It’s never a good idea to waive the home inspection unless it’s a complete remodel and you re a skilled investor / contractor / remodeler. But the Buyer can shorten the time frame for the inspection from 17 days to maybe 10 or even 7 days.
HOA ASSESSMENTS – If the home is in a homeowners association – there could potentially be special assessments in place or coming up. The Buyer may ask the Seller to clear the assessment, paying it all. This can be negotiated between Buyer and Seller for who pays and how much they pay toward the assessment.