Negotiating and Closing a Good Deal - Q & A
Q: Are low offers a good idea in the normal market?
A: More than likely your low offer will be rejected immediately in the normal market. In the buyer's market your low offer could be more successful. A motivated seller will either accept the low offer or make a counteroffer.
Full-price or above offers are more likely to be accepted by sellers, however, other considerations are involved:
*Is the offer contingent upon anything, such as the sale of the buyer's current house? If so, a low offer, even a full price offer, may not be as attractive as an offer without that condition.
* Is the offer made on the house as is, or does the buyer want the seller to lower the price or make some repairs instead?
* Is the offer all cash, meaning the buyer has waived the financing contingency? If so, then an offer at less than the asking price may be more attractive to the seller than a full-price offer with a financing contingency.
Q: What contingencies need to placed into an offer?
A: Financing and inspection contingencies are the standard contingencies most often included in most offers. The financing contingency makes the sale dependent upon the buyers ability to obtain, from a lender, a loan commitment. An inspection contingency allows the buyer to have the property inspected by a professional to their satisfaction. Under certain circumstances a buyer may decide to forfeit his or hers deposit, such as backing out of the deal for reasons which are not stipulated in the purchase contract.
The purchase contract must include the seller's responsibilities, such things as passing clear title, maintaining the property in its present condition until closing and making any agreed-upon repairs to the property.
Q: How is the price for my home set?
A: When pricing your home it's very important to make sure the price chosen is relative to the current market conditions. Due to the fact that the real estate market is continually changing and market fluctuations have an effect on property values, it is imperative for you to select a list price which is based upon the comparable sales within your neighborhood.
Your list-price decision will be based on the background data which is provided by the comparative market analysis. Yous should make an effort to study the comparable sales material which was presented to you by the agents you interviewed initially. Have your agent update the report for you if the analyses are more than two to three months old.
Go with the consensus, if all agents agreed upon a price range with your home. The agents you have to watch out for are the ones whose opinion of value is considerably higher than others.
Q: Are low-ball offers advisable?
A: Offers on houses that are substantially less than the asking price are considered low-ball offers. These offers can be presented, however, they will more than likely make a prospective sale go sour. Low-ball offers may also discourage the seller from negotiating at all. The low-ball offer will be rejected, that is unless the house is overpriced.
Before making any kind of offer, one should do their homework and observe comparable prices in their neighborhood. Knowing something about the seller's motivation is also a plus. Sellers may be motivated, if a lower price is offered with a speedy escrow. Sellers who fall under this category are those who need to move, have another house under contract or must sell quickly for other reasons.
Q: Are lenders willing to negotiate on interest rates?
A: There are lenders who are willing to negotiate when it comes to loan rates and the number of points, however, it's not typical among more established lenders who tend to set their rates high, the way large corporations set the prices on their goods. Before speaking with a lender, shop around for loan rates and get to know the market.
If you are looking for the best deal possible, consider looking at the combination of both the interest rate and points.
Purchases which involve seller financing, are more open to interest rate negotiations. Usually these are based upon market rates, but there is some flexibility when deals such as is are negotiated.
Be sure to check into the flourishing number of Internet sites, when shopping for rates, that publish such information. Also look for published rates found in local newspapers.
Q: Are homes available to buy below market?
A: Investors who make bargain buys usually go through multiple houses as opposed to the typical buyer who may look at five to ten houses before making an offer. To find a real “bargain” most experts agree that it takes a lot of determination. To buy a bargain property there are a number of ways, listed below are a few of them:
*Buy a fixer-upper in a transitional neighborhood, improve it and keep it or resell at a higher price.
* Buy a foreclosure property (after doing your research carefully).
* Buy a house due to be torn down and move it to a new lot.
* Buy a partial interest in a piece of real estate, such as part of a tenants-in-common partnership.
* Buy a leftover house in a new-home development.
Q: Is the price on new homes negotiable?
A: Negotiating the sales price with a developer can be a difficult process for they claim their prices are based on fixed construction costs. It doesn't however, hurt to try.
According to experts, builders are likely to be more flexible on the price at the very beginning and towards the end of a development project. Most developers, early on, are eager to move people in quickly in order for the project to pick up momentum. Later on however, when only a few units remain, developers may be more inclines to accept lower offers.
Buyers commonly negotiate for better amenities such as; carpet upgrades, light fixtures or lot location when negotiating the sales price does not work. Experts say rarely will a developer pass up a deal over a couple of hundred dollars worth of carpet.
Q: Who is entitled to the furnishings when a home is sold?
A: Personal property that is permanently attached to the house such as; fixtures, drapery rods, built-in bookcases, tacked down carpeting, or a furnace remain intact unless it is otherwise stated within the sales contract. Anything that is not nailed down or built-in, however, is negotiable. This mostly involves appliances like washers, dryers, and refrigerators. Certain sellers may be interested in negotiating more personable items such as a piano.
Q: What are your thoughts on get-rich-quick real estate schemes?
A: Real estate experts say that get-rich-quick schemes do not exist when it comes to real estate. Even though there is no such a thing as getting rich quick in the real estate industry, it doesn't stop programs from being aired to the public who are looking for an alternative method to purchasing real estate.
A handful of these schemes are nothing more than scams, some are reputable and others depend upon your financial circumstances to work.
Advice on how to take part in other government programs and how to buy government foreclosure properties are offered by many get-rich-quick on real estate programs. You can also obtain this information by contacting the government offices which are involved directly. If interested in real estate investments, one should explore a variety of sources. Many investors claim real estate as a long-term investment. Be forewarned though, any investments that sound too good to be true often are.
Q: When is the best time to buy real estate?
A: The real estate market starts heating up as early as February due to the fact that a copious amount of buyers prefer to move into homes during the spring or summer. During summertime vacation, families with children are often anxious to buy before the new school year begins.
In the late summer, the market has a tendency to slow down but it picks back up again briefly in the fall.
Usually the months of November and December are slow months, however, during this period astute buyers tend to look for bargains.
Q: Are there any tips on the negotiation process?
A: The more one knows about the motivation of a seller, the stronger the negotiating position. A seller that needs to relocate quickly because of a job transfer, for example, may be amenable to a speedy escrow attached to a much lower price. Other individuals classified as “motivated sellers” are those who are going through a divorce and those who have already purchased another home. Keep in mind that the listing price is merely what the seller desires to receive and is not necessarily what they end up settling for. Research recent sales prices of comparable homes in the neighborhood before making an offer to see how the seller's asking price stacks up to your findings.
Q: Do sellers make repairs before going on the market?
A: In order to seek a higher sales price, many sellers make all minor repairs before going on the market. Purchase contracts include a buyer contingency called an “inspection clause.” This particular clause permits the buyer to back out if numerous defects are found. Attempts to negotiate repairs or a lower price can be done by the buyer once the problems at hand have been dually noted.
Q: Can you define the terms: list price, sales price, and appraisal value?
A: The seller's advertised price is considered the list price. The list price is a figure, a rough estimate of what the seller intends to receive. Sellers can price high, low or close to what the hope to get. Regardless, to be certain that the listed price is a fair one consult the comparable sales prices in the area.
The amount of money you as a buyer would pay for the property is what's known as the sales price.
A certified appraiser's estimate on the worth of a property is the appraisal value. It is a value based upon numerous factors, two of which are; the property's condition and comparable sales.
Q: When buying a home, what is the first step taken?
A: The first step is finding out just what you can afford. This can be done by pre-qualifying for a home loan. By doing this step it will narrow your search down to both particular houses an a neighborhood. Pre-qualifying for a loan is a simple calculation that considers primarily upon your income as well as many other factors. No guarantees are made with a lender pre-qualification notice, however, it will be expected of you to make an offer on a home.
Q: Do I need to include an inspection contingency in my offer?
A: it is wise to include an inspection contingency in your offer for it protects you as a buyer in a purchase offer. It also gives you the option of canceling the closing on a deal if problems are found with the property by an inspector.
When the seller accepts a written offer, the document then transitions into a legally binding contract. Contingencies for any repairs which are needed or related items that the seller needs to handle before closing can be written into the purchase contract. You, the buyer, have the ability to delay or cancel the closing if the issues at hand are not dealt with and you have the clause in your contract. If, however, it is not stated within your contract then you may face losing your deposit. Backing out of a contract may also lead to costly legal implications.
Usually you are given the right to choose the inspector and are responsible for paying for the inspections. Pest control inspection reports, roof inspection reports and the contingencies for no environmental hazards (such as asbestos or radon gas) can be requested in addition to your overall inspection.
Both the buyer's and the seller's concerns should be satisfied by the contingency clauses. By inserting additional necessary contingencies within the contract is a way for the buyer to protect themselves. All items and appliances that are to remain with the house need to be indicated.
Lastly, you want to stipulate that you have the right, 24 hours before closing, to personally inspect the home to be certain that everything is in order.
Q: Does the seller have to consider contingencies?
A: If you are a seller in a seller's market, in which there is more demand than supply, you probably won't have to entertain too many contingencies. But if you are selling in a buyer's market, when buyers are few, prepare to be very flexible. Granting contingencies also depends upon what kind of price you want to get and on the condition of your property, most experts agree. Remember, contingencies are written into the contract and are negotiable during the negotiation phase only.
