Homeownership is a big step and it is important to make sure that you approach it wisely. The first step is to be Pre-Approved by a mortgage professional you trust to give you the best advice on your mortgage qualifications and your mortgage options,
Then, when you do find the home that you are looking for, there is often the opportunity to negotiate a price that is lower than the list price.
You need to know what you are doing, because negotiating poorly can cause you to lose the home that you truly want. Work closely with a Realtor you trust. He/She is on your side and has been through the process many times. In addition to their experience, here are 5 Important Negotiating Tips First Home Buyers should consider:
1. Try not to get emotional. It can be extremely tempting to bid top dollar for a place that has everything you have ever wanted, but you could end up setting the negotiating standard so high that you can’t afford the house.
You need to set your limits before you put in an offer and don’t compromise. If you become too emotionally attached to a particular property, you might feel unwilling to pass on an offer that might be unreasonable or simply too much for your budget. Many First Home Buyers are scared to end negotiations and move on when they probably should. Be as objective as possible, and don’t compromise your standards just to jump into a home.
2. Get a Comparable Market Analyses (CMA). Here’s where your Realtor can be a big help. Experienced agents can easily supply you with a CMA, which is basically an average price range for recently sold home within the same neighborhood with the same features.
Ask your real estate agent about comparables before you place your offer. It is important to know whether or not the asking price for the home is reasonable, overpriced or underpriced when compared to others that have just been sold.
If you are home shopping on your own, you can still contact an agent in your area to get a free CMA. You might be able to find them online.
3. Access the seller’s motivation level. There are many reasons why people sell their homes. Sometimes people are relocating for job purposes, divorce, moving up, downsizing, or the owner passes away. If the seller is in a situation where they need to be rid of the property quickly, you may be able to bring them down in the asking price. Sellers who seem more relaxed or are not in a hurry to sell may not be willing to negotiate at all.
Whatever you do, gather as much information as you can about who the seller is and why they are selling. The information you find can be positive or negative in terms of getting the price you want; knowing the facts will benefit you either way.
4. Make a firm and reasonable offer. People who are new to the real estate market assume that in order to get the price they truly want, they should start out very low with their offer. This may not be the best tactic as it could insult the seller and make them want to hold firm to their asking price.
Use what you know about the CMA, the condition of the property, and the down payment that you can afford to present a fair number. It is perfectly fine to make an offer that is slightly lower if you know the seller is motivated, however, don’t go insultingly low. It is also wise not to add a long list of conditions or requests.
5. Put everything in writing. Verbal offers are difficult to enforce. Once you and the seller have agreed upon a price and terms; make sure that everything gets printed out and signed by both parties.
With a verbal agreement, you might remember the agreement a certain way and the seller might disagree with you. You can avoid this problem all together with some ink and paper. Here’s where your agent and attorney can help. Purchase agreements are required to be in writing. Putting everything down on paper will keep confusion out of the picture.
SUMMARY. Overall, the best way to approach negotiations when you find a property that you like is to proceed with caution. Understand that perhaps it may not work out in your favor and you will need to move on.
You should not see this as a negative possibility, because the next house might suit your needs better, even if you don’t “fall in love” with it right away.
Do your homework, be realistic, and be reasonable. When the seller comes to the table with the same rationale, you just might come out of the negotiations as a homeowner.
If I can answer any questions you may have about how changes in the mortgage market affects you, do not hesitate to give me a call.
I appreciate your business and the opportunity to help.