How to Negotiate with Sellers and Buyers
Informed Bids Take Research.
The first thing to do before starting the negotiating process is some research. That means understanding the community, and the selling price of comparable homes. This way it's possible to make fair comparisons to homes that have sold recently in the neighborhood.
Why is the Home for Sale?
Buyers should also consider "mitigating" factors. These are the reasons to increase or decrease a bid for a home. Some of the questions to think about include:
- Why is the homeowner selling in the first place?
- How motivated are they?
- Is there a problem in the neighborhood, or did someone get a new job and need to relocate?
- Does the seller have an inflexible time-frame for selling the home?
- Does the family need to get out by a certain date because they are moving into a new home?
- Do they need to move before September so there kids can be settled into their new school?
- How long has the home been on the market? If it has been on the market for a long time, it's important to figure out why.
- Is the market that slow, or does the house have a serious problem?
- What are the true defects of the home?
- Is a neighbor's home in bad shape?
- Is the roof in need of repairs?
- What is the traffic like on the street?
- Is the neighborhood safe?
Finding the answers to these questions will help buyers to negotiate in a more objective and effective manner with the seller. It's always better to negotiate with facts on your side.
Buyer's and Seller's Markets
One of the more important factors to figure out is if the home is located in a buyer's or a seller's market. This dynamic follows the rule of supply and demand.
The following lists of attributes can help distinguish between a buyer's and a seller's real estate market.
The following characteristics are normally associated with a buyer's market:
- There are lots of homes for sale in the township
- Homes are slow to sell. It takes weeks or months to sell a home, not days
- Sellers might be offering incentives to buyers
The following characteristics are normally associated with a seller's market:
- Homes are selling quickly. They might even be selling before the home is hitting the real estate multiple listings
- There are an unusually high number of "for sale by owner" homes
- Few Incentives, if any, are offered to buyers
These points should guide you in determining whether or not you are in a buyer's or a seller's market.
Falling in Love with a Home
Of course everyone should fall in love with a home they're thinking about buying; but never let the homeowner or real estate agent know you're in love with a home. That means keeping your emotions in-check when touring the house.
If you're interested in a home, then there is no reason to hide those feelings. In fact, it never hurts to flatter a seller by remarking how nicely the home is decorated or the color combinations they've used on the walls work well together.
Youâ€™ve Opened Escrow, Now What?
If youâ€™ve just opened escrow, and are now wondering what will happen next, here is an introduction to the escrow process timeline. Although not all home purchases follow the exact same escrow process timeline, the following is acommon step-by- step glimpse into the process:
The lender will do their own appraisal to ensure that the agreed upon purchase price is not higher than the home value.
You may already be pre-approved or pre-qualified for a loan; however, once you have decided on a specific property the lender will prepare a â€śgood faith estimateâ€ť that details the loan amount, monthly payments, interest rate, and closing costs.
The seller must provide you with a written list of any known problems with the home.
You will need to have a certified home inspection as well as other inspections that are required by the lender such as a pest inspection or a flood inspection.
Your lender will require you to provide proof of homeowners insurance. You may also need additional insurance, such as flood, earthquake, or hurricane insurance depending on where the home is located.
6. Title report/insurance
The seller must have a clear and unencumbered title to the home in order to sell it to you. A title report looks for things such as liens that would prevent a clear title. You may also need to purchase a title insurance. Title insurance protects you if something is overlooked during the title search.
7. Final walk through
This is done to make sure nothing has changed since you made the purchase offer and that items such as appliances or window treatments are left behind if they are part of the purchase agreement.
8. HUD forms
This will arrive just before the closing and is the final statement of loan terms, fees, and closing costs. Review it for mistakes.
9. Close escrow
This is when you close on the home. You will sign lots of documents and will likely need to pay costs related to the sale other than the purchase price. The lender will transfer the remaining purchase money and your escrow funds will be released by the escrow agent and applied to the purchase price.
Working with an experienced real estate professional is highly advisable when buying a first home to ensure that the escrow process timeline proceeds in a smooth manner. For more information about how to navigate the escrow process, contact one of our Better Homes and Gardens Real Estate professional today!