Negotiating Your Home Purchase!

Negotiations over the purchase of a home begin when you present the seller with a written purchase offer, usually through your real estate agent. The seller can accept your offer, in writing, reject it, or write a counter-offer, usually by modifying the original offer you presented. Several series of counter-offers may go back and forth before you and the seller finally reach an agreement.

The process of contract building ends when both you and the buyer sign the contract. At this point, the home is considered to be “sold,” though the terms of the contract will not be fulfilled until settlement.

Whether you ever reach an agreement, however, will depend on how well you and your agent negotiate the terms of the contract with the seller. If you took the time to prioritize what you wanted in the home and contract terms, you can refer back to those priorities at this stage to help you focus your negotiations.

Work For The Win-Win Solution

The whole point of negotiating is to find that point at which both parties to the contract get enough of what they want. Yet, sometimes the stickiest issues in negotiations over a home sale are very small ones. Sales have been lost, or nearly lost, over minor details when both the buyer and seller insist on getting their way and neither will compromise.

It’s important to be flexible, while keeping your attention fixed on your primary goals and the final outcome. Ask yourself: Should you demand a specific item or group of items to convey with the property at the risk of having your offer rejected? How much would it really cost you to delay, or move up, your occupancy date? Will you kick yourself if your initial offer is rejected (or out-bid) because you offered too little or asked for too many contingencies?

Be aware that market conditions will play an important role in your negotiations. If you’re fortunate enough to be buying in a buyers’ market, you won’t need to be quite as flexible, or generous, as you might need to be if there aren’t enough homes to go around.

Sales Price

Although the offer price is certainly important, it is only one part of the contract. Other contract terms will increase or decrease the amount of money you actually pay for a home. For example, you may offer full listing price (or more), but ask that the seller pay some or all settlement costs, which could amount to several thousand dollars. Keep your calculator handy when negotiating. You’ll want to assign value to everything you receive and offer in the contract.

In a strong market, you could face a multiple-offer situation. In this case, you may want to include an escalation clause in your contract, indicating that you’ll top the highest bidder by a certain amount, say $5,000. Be sure to see a copy of the highest offer before letting the clause go into effect. Also, make certain you have enough cash to cover the difference if your lender doesn’t appraise the home at the contract price.

In a weak market, you may offer somewhat less than the asking price, and hope to get a bargain. Consider, though, that other contract terms might be nearly as important to the seller as the offer price.

Deposit

Your offer will be accompanied by a deposit check or earnest money, representing the seriousness of your intentions. The seller will think about the size of that deposit before accepting a contract that pulls his or her home off the market. The larger the deposit, the more confident the sellers will be of your ability and willingness to follow through with the contract.

Settlement Costs

Different traditions exist in different areas of the country as to who typically pays certain types of settlement costs — loan points, attorneys’ fees, title searches, recording fees, etc. Nevertheless, you and the seller can split these costs any way you want as you negotiate your contract.

You and the seller may agree to pay particular costs. Or, one of you may agree to pay a specified amount, say $2,000, toward the total cost of settlement. Be sure to factor the costs you decide to pay, if any, into your bottom line.

Conveyances

When buying a home, make sure you know what belongs to the house (what “conveys” to the buyer) and what the sellers can take with them. Generally, if something is connected to the wall, floor or ceiling, inside or outside, that would cause visible damage if removed it is considered a “fixture” and stays, such as antique hardware, chandelier, awnings, draperies, blinds, shades and rods, TV antenna, unless specifically stated “does not convey” in the contract.

Items that are not connected to the home, such as free-standing appliances, outbuildings, play sets, firewood, pool chemicals, garden tools or window air conditioners, do not convey with the home. These items should be specifically listed in your purchase offer if you want to include them in your contract.

Contingencies

You’ll discover all sorts of contingencies in real estate contracts. In most cases, you’ll want to include a financing contingency, making the sale dependent on the your ability to secure a particular type of financing, at or below a specified rate, by a certain date. (Ideally, you’re already pre-approved for a mortgage.)

Another common contract inclusion buyers seek is an inspection contingency. With a “general inspection contingency,” you would have the option to walk away from the contract if you don’t like anything found in the professional inspector’s report. If you include a “specific inspection contingency,” however, you’ll only be able to get out of the contract if certain problems exist or, if other problems are found, the seller isn’t willing to resolve them (e.g., timely repairs at the seller’s expense, reduction in sales price, etc.). Sellers would be more inclined to accept a specific inspection contingency.

You can ask for a home-sale contingency, making your purchase of the home dependent on the sale of your old home within a specified period of time. If you’re in a strong sellers’ market, this isn’t likely to be accepted since it could delay settlement or increase the possibility that settlement won’t occur.

A number of other types of contingencies and terms are possible. Rely on your professional agent’s advice to help protect your interests as you move through the complexities of contract negotiation.

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How to Pick the Right Home for You!

Once you’ve determined how much you can afford to spend on a home — ideally with a mortgage pre-approval — take some time to consider what you’re really looking for.

Make a list of features you want: number of rooms, lot size, amenities (e.g., fireplace, up-to-date kitchen), sidewalks, architectural style, particular neighborhoods or school systems, etc. Also consider whether you’ll need financing from the seller, a particular occupancy date, or other specific contract terms. (Seller listings may mention certain contract terms they will and will not support.)

Now place your preferences in two categories: “must haves” and “wants.” With a clear picture of your preferences, your agent will be able to focus quickly on locating and showing you appropriate properties. You’ll save time and energy, and you’ll be able to choose a home with less anxiety.

Take Notes

One of the frustrating aspects of home shopping is remembering all the properties you look at. You can better keep track of them by creating a standardized form to fill out as you tour homes. (Although some homes may offer a summary brochure of features, others won’t.)

Your form should leave room for each home’s distinctive details: number of bedrooms and baths; interior colors and decorating style; proximity to schools, shopping and work; neighborhood atmosphere; yard amenities, etc. You may even want to take a Polaroid or digital photo of each home to jog your memory.

Cost Vs. Location

Remember, in the world of real estate, a good location is always a good investment. It’s likely to cost you more too.

Home values reflect proximity to good schools, shopping, recreation, cultural opportunities, places of worship, and places of employment. Although you may be able to get more home for your money (or the same home for less) away from such things, consider whether increased travel time and hassles are worth the trade-off. A remote location could be your ticket to serenity or a passport to isolation, depending on your unique circumstances and priorities.

Ask yourself:

Where will family members go most often from this new location? How easy will it be to reach those places? How accessible are schools, churches, grocery stores, medical care, public transportation, shopping malls and neighborhood services?
What is the view from the house and yard? Is the yard right for your anticipated activities? What uses are possible for nearby undevloped land? Is a new road or road-widening project planned?
Is rush hour traffic a problem? What will be the impact of special events such as local high-school games or church picnics?
How easy is it to get into and out of the driveway? Are streets well-lit at night?
What utilities serve the property? Are the rates competitive? Where will you get your mail? Where are the easements, if any?
Is the soil stable? Is part of the property on a flood plain — if so, what is the history of floods on the property?
Does the community have special by-laws or architectural controls over changes to a home? What are the pros and cons?
Assign priorities to important elements of the home’s location. Then make a list of the positive and negative aspects of each property you tour.

Appreciation Vs. Neighborhood

Areas that have experienced healthy market appreciation over the past few years are certainly worth considering. Remember, however, past performance is not always a reliable predictor of future appreciation or depreciation. A variety of factors affect the stability of property values, including local and national economic trends, the quality of original construction, and the life-stage of the neighborhood.

While newer homes tend to appreciate faster than older ones, they may lack amenities that are important to you — shade trees, sidewalks, variety of architectural designs, etc. If you seek the charms of an older neighborhood, the presence of an active homeowners association, preservation group or renewal effort will help ensure the soundness of your investment.

New Vs. Resale

With a new home, you’ll have the advantage of being able to choose the colors and finishes for floors, bath tiles, kitchen counters, cabinets and appliances. You can opt to upgrade and select builder options, and often you can choose a specific lot. Everything will be clean and new when you move in.

On the other hand, you may not be able to see your new home until the final walk-through. There may be a number of items on your “punch-out list” that need to be fixed or finished by the builder’s crew. Often, new-home buyers have to deal with continuing construction traffic, debris, mud, dust and unfinished roads — at least until the development and adjacent developments are completed. And new homes do have a break-in period, often with problems related to settling.

With a pre-owned home, you can actually walk through the home you are buying, and many personal touches, such as drapes and curtains, will likely have been added. You can also tell what the neighborhood will be like by driving through both during the day and in the evening. Shade trees and mature landscaping often give older neighborhoods a more charming ambiance. Generally speaking, you’ll get more home for your money buying an existing home.

The down side of resales: You may find that the seller’s tastes are not yours. It may be necessary to redecorate, even remodel, to tailor the home to your own color scheme, design preferences and lifestyle. Also, appliances and systems may be several years old, perhaps approaching the need for replacement.

Outlay Vs. Return

Some financial planners recommend buying as much home as you possibly can to maximize the significant tax advantages of homeownership and the potential return on your investment. (After all, a $300,000 home that appreciates 20% over five years would sell for $30,000 more than a $275,000 home appreciating at the same rate.)

If your income is likely to grow in years ahead, it might be wise to stretch your budget for the first few years, buying a home that will accommodate your needs well into the future.

Be careful, however, not to ignore the costs of upkeep when making your budget calculations. The more expensive the home and the larger it is, the more costly (and time consuming) it will be to furnish, maintain and repair. Will you have enough discretionary income and time left over for the other priorities in your life?

House Vs. Home

Buying a house is certainly a major financial investment. Buying a home, however, is an investment in your family’s future. Ultimately, the most important question to answer when looking at any home is, “Will we be happy living here?” No one can answer that question for you, but when you find a home that sparks an enthusiastic “yes!” it’s time to consider making an offer.

Eight “Need-to-Knows” When Looking to Sell Your Home!

In today’s real estate market, there is no time to waste by setting the wrong price for your home or, even worse, testing the market to see if you can get a higher price first before “settling” for a realistic price. When your home is priced right, it will sell…FAST!

Knowing exactly how to pick that “right price” is the difficult part, and we’re here to help. As real estate professionals, we know our local market, the price trends and your neighborhood. We have access to data from a variety of sources to show you how to arrive at the right price for your home. We also examine our real estate market’s “Big Picture” to provide you with the best information to price your home right — and price it to sell.

As a home seller, the more you know, the better your price will be. Here are eight top pricing need-to-knows we use to craft a price for your home. Give us a call to learn more about how to get your home sold.

New Listings If you list your home for sale right now, new listings — homes on the market 30 days or less — show you exactly which homes your home is competing against. You want your home to stand out in this crowd not only by price, but also by condition, making it a great value. We price your home and work to get it sold before it leaves the “new listings” category.

Active Listings Active listings are the total number of homes on the market, including those under contract. Watching this number shows whether homes are selling and whether new properties are coming on the market for sale. While your home is on the market, until it closes/settles, it is considered an active listing.

Average Days On Market When average days on market is high, that means it’s a buyers market with homes taking longer to sell. In this situation, you need an aggressive listing price for your home to attract attention — and buyers — immediately. The longer your home is on the market, the less attention it will get — no matter its condition. When your home lingers for sale, buyers often assume that your home’s price is too high or something is “wrong” with the property — whether true or not.

A correctly priced home creates urgency, captures the first buyer and minimizes your time and expenses.

Months Supply Of Inventory The supply of homes for sale, relative to demand, has a major impact on the direction of home prices. Months supply of inventory is the total number of new and existing homes for sale divided by the number of homes sold per month. Balanced markets (where neither buyers nor sellers have a particular advantage) have about a four- to six-month supply of homes. As inventory exceeds a six-month supply of homes, buyers begin to have an advantage and downward pressure on prices may occur; when inventory shrinks below a four-month supply, competing buyers bid up home prices.

List-To-Sales Price List-to-sales price data is a ratio showing how much a home was listed for initially and its final selling price. When selling your home, you should entertain every offer made on your home. In a buyers market, the final sales price sometimes can be below the listing price…unless you have priced it aggressively from the start, in which case you may receive several at- or above-price offers. If, for example, homes were selling at 92% of list price six months ago, but are now selling at 95% of list price, we know downward pressure on prices is easing.

Expired Listings Home sellers who have had their home on the market for the duration of their listing contract (say, 90 or 180 days or more) and have not accepted an offer to sell are called expired listings. This doesn’t mean the sellers didn’t receive offers; it simply means that they didn’t accept one. Looking at expireds is a great way to determine what prices (and associated property conditions) are not selling in our area.

Overpricing is the costliest mistake most sellers make.

Canceled Listings Homes that go off the market because the listing is canceled may be removed due to the sellers changing their mind, circumstances changing (relocation canceled, foreclosure, etc.) or simply not getting an acceptable offer. Again, canceled listings provide insight into what the market can bear in terms of home price and condition, but be careful; a well-priced home listing might be canceled for reasons other than lack of offers.

Putting The Data To Work For You Remember, each piece of data on its own is just a single piece of the pricing puzzle. We will help you understand the data and learn how to use it to arrive at the best listing price for your home. Feel free to give us a call when you are ready to sell your home. We’ll analyze the current market trends to help you price your home to get offers and to get it sold!