Under most circumstances, a home purchase is the single biggest transaction you will make in your lifetime. It involves lots of money changing hands, piles of paperwork and legal documents, and plenty of negotiation.
Typically, the third item makes some homebuyers nervous or uncomfortable. Do you feel that way about it? Does the thought of having to negotiate a fair price overwhelm you?
The good news is: (a) you don’t have to do it alone; and (b) we can provide you with some helpful tips to make the process a little easier on all parties involved.
Every Home Buyer Needs Representation
Before digging into the negotiation tips, let’s get one thing straight: You need representation. While you may have heard stories about buyers representing themselves and saving the commission, it’s not worth the hassle.
An agent more than earns his or her commission, and you’ll be much better off forking over that three or four percent. The reason we say this is the current DIY culture has given many buyers the wrong impression; they seem to be under the impression that buying a home is as simple as buying a car.
“I find more and more that buyers are calling the listing agent of a property and expect them to have their best interest in mind,” says Christopher Pagli, real estate broker. “The listing agent represents the seller in a transaction, and should always have the seller’s best interest in mind. Anything you say to the listing agent can, and will most likely be used against you in a negotiation.”
On the other hand, a buyer’s agent works with the buyer and looks out for that side’s interests. This removes much of your burden of having to negotiate directly with the seller.
Seven Negotiation Tips
Just because you have an agent representing you, that doesn’t mean you get to sit back and watch the process unfold, however. There are a still a number of things you need to do.
Here are seven basic tips to guide you through the process:
• Get your finances straightened out.
Before ever looking at the first, it’s essential to get all your financial documentation squared away with the lender. Most buyer agents won’t even work with buyers unless they can show mortgage preapproval documentation. We can’t stress this point enough. From a seller’s perspective, an offer is much more persuasive if it’s backed by preapproval. As you may know, the process of getting preapproved can take weeks or months, and a sane seller isn’t going to want to risk getting caught up in that process.
• Don’t be stubborn.
It’s amazing how many real estate transactions fall through because the buyer or seller is just too stubborn to budge from a particular price. Although it can feel good to get your way, the difference between one price and another may not be much of a difference at all. For instance, at an interest rate of 4.3 percent, the difference between $199,000 and $195,000 may only be $19 a month in mortgage payments. Is that really enough to walk away from a deal?
• Never count on the inspection.
Though a poor home inspection definitely gives the buyer leverage to negotiate a lower price, you can’t count on this happening. Even if the inspection unveils a handful of issues, the seller may not be willing to give you a lower price. In hot markets, there may be plenty of potential buyers who would be willing to fix the problems themselves.
• Home in on the seller’s motivation. Every little piece of information you can glean about the seller will help you and your agent at the negotiation table. Attempt to find out what the seller’s motivation is and use that knowledge to your advantage. For example, has he already purchased another home? If so, the seller will likely want to be out of his current house by the end of the month, in order to avoid an extra mortgage payment. And if the seller needs to be out quickly, be may be willing to accept less than the home is worth.
• Take care of repairs yourself. If the home inspection process does unearth some issues, it may be in your best interest not to insist that the seller to fix things. Instead, get some estimates from licensed contractors and find out what it’s likely to cost to repair the problems. You can subtract those figures from the sale price. Many sellers simply don’t want to deal with the hassle of repairs, so this is a good way to make them pay for the repairs without having to wade through the details.
• Remove contingencies. Anything you negotiate has to be kept in perspective. While it’s smart to include a number of contingencies in your first offer, don’t let minor caveats prevent a deal from going through. You may want the nice stainless steel refrigerator in the kitchen, but are you really going to let a seller’s unwillingness to give it up ruin your pending deal? Sometimes removing contingencies can allow you to stay at your original offer price.
• Be willing to walk away. As a buyer, you must always be willing to walk away from a deal if you can’t get the right price. This is one of the principles of effective negotiation. Before you even start to look at houses, make sure you and your agent are on the same page. A good agent won’t let your emotions get the best of you. He or she will keep you grounded and encourage you to walk away from the negotiation table when you can’t get the price you want.
Contact Green Residential Today
At Green Residential, we’ve been in the Houston property management business for more than 30 years. Over that time, we’ve developed a thorough knowledge of the ins and outs of the market.
From buying and selling to converting private residences into rental properties, we’ve seen it all. And though we can point you in the right direction when it comes to buying a new home, we specialize in property management.
Whether you have a dozen different rental properties in your portfolio or you’re looking to make your first investment, our team of experienced property management experts is ready to help. For additional information, please contact us today!