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Negotiation 101

by Desi Sowers

It seems that negotiation has become a lost art in the world of real estate, and that’s unfortunate because the truth of the matter is, if you don’t ask…you don’t get. While sellers want the highest price and buyers want the best deal, they must meet somewhere in the middle for the deal to close. Negotiation is a vital part of selling or buying a home because it is the largest asset people own and there is a lot of money at stake. Here are some guidelines for what sellers and buyers might ask for in real estate negotiations:

  1. Price

Negotiating the best price means different things for sellers and buyers.  The seller wants the highest price and the buyer wants to pay as little as possible.  For a successful transaction, they have to compromise and come up with a price that is acceptable to both.

  1. Closing Costs

Prepaid closing costs are paid by buyers for their mortgage.  These are funds that the mortgage lender holds in escrow for expenses like taxes and insurance.  A buyer may ask a seller to cover some or all their closing costs either with a flat dollar amount or up to a percentage of what’s an allowable contribution for a lender.  If a buyer asks the seller to do this, they are likely going to pay a higher asking price.

  1. Closing Date

Sometimes sellers want to get out of a home quickly because they need the capital from that house they are selling to put toward a new real estate purchase.  The closing date will also affect they buyer’s monthly cash-flow because when a buyer closes on a house, they skip the next month’s mortgage payment, therefore they may want to negotiate to close at the beginning of a month.

  1. Financing Contingencies

When there is a financing contingency in place for a real estate transaction, it can tie up a seller’s property for a required 30 to 60 days.  For this reason, many buyers prefer buyers coming to the table with cash offers. If you are competing with cash buyers, you may want to figure out if you can drop the financial contingency, which will shorten the closing time line. You can do this by getting pre-approved for a home loan prior to making an offer.  Mortgage preapproval shows that your finances are in order and you can afford the home.

  1. Home Warranty

As a buyer, you can request a home warranty. As a seller, you can offer one.  This home protection plan covers things like appliances and systems such as the hot water heater or air conditioning, in the event they repair or replacement.

  1. Leaseback

The moving process is stressful and labor intensive.  Sometimes a seller will need extra time to get into their new home.  When this happens, buyers can offer a zero-cost rent-back for 30 to 90 days to persuade the seller to accept their offer over others. 

  1. Home Repairs

With a home that needs a lot of updating there comes ample opportunity for negotiation. Buyers need to consider the cost of bringing the home up to current standards and use the estimate of that cost to request a lower asking price.  The seller, on the other hand, can specify that the house is being sold “as is” and not offer any repairs.

  1. Appraisal Contingency

A seller can push for a buyer to waive the appraisal contingency, however, if for some reason the appraisal falls short of the expected amount, they need to be prepared for the amount of cash they might have to pay should the bank only be willing to lend them money based on the appraised value.

  1. Furniture

Personal property such as patio furniture, window treatments and chandeliers is all up for grabs.  If the buyer can ask for these things to be included in the contract.  Sellers need to determine what they are willing to leave behind.  And any exclusions need to be specifically listed in the contract as well.

  1. Appliances

Depending on the market, sellers don’t always leave every appliance for the buyer.  They may include the dishwasher, stove and built in microwave in the contract but not the refrigerator, washer and dryer.  Sometimes they don’t want to give everything away up front so that they can use these as items for negotiation.

  1. Inspection

When sellers waive inspection, they often find themselves with "buyer's remorse", but they can try to shorten the time frame for inspection, from ten days to five.  However, today’s lending practices and the TILA RESPA Integrated Disclosure (TRID) make this hard to do.

  1. Condo/Co-op Assessments

These are fees that are used to maintain common areas in a community. If there is an open assessment, it can become a negotiation between the buyer and seller as to who will pay for it.

 

If you are interested in buying or selling a New River Valley home, contact Desi Sowers at 540-320-1328, and discover the difference she can make during your family's move. 

 

Real Estate Myths – Don’t Let Them Fool You

by Desi Sowers

Whether you are buying or selling a home for the first time or you are a seasoned veteran of buying/selling real estate, chances are you think you have the knowledge needed to navigate the process based on what you have read or heard from friends and family. Unfortunately there are a plethora of myths circulating about buying and selling houses that have become prevalent, but just aren’t true.  The pitfall of believing everything you hear or read is that real estate myths can hurt you where it counts…in the wallet.  Here are eight common ones that can cause home buyers/sellers to make unnecessary mistakes:

 

  • Set your home price higher than what you expect to get.
    Setting your asking price too high, may actually net you a lower price.  That’s because many shoppers and their real estate agents will not look at houses that are priced above market value. While it’s true that you can lower your price if you have not gotten offers in the first few weeks, “Buyers are highly suspicious of houses that have sat on the market for more than three weeks,” says Nela Richardson, chief economist for the brokerage Redfin.

 

  • You can get a better deal as a buyer if you don’t use a real estate agent.

This is a false assumption. When a house is listed with an agent, the total sales commission is already built into the price.  If the buyer doesn’t use and agent, that just means the selling agent will get the entire commission.

 

  • You can save money selling your home yourself.

While it is possible to successfully sell your home on your own, there is a great deal of work that goes into it. You must know how to get the home listed online, market it to prospective buyers, negotiate the contract and deal with any issues that arise during the inspection or loan application phases.  In addition, buyers will expect a significant discount, so what you might save on real estate commission may not be as much as you thought it would be.

 

  • The market will only go up.

Over the years, homebuyers and sellers have experienced a time of increasing home values, then a sharp decline due to the economy and then an upturn where values increase again.  But many people believe the market only goes up.  You need to be aware that prices can fall dramatically.

 

  • You should renovate your kitchen and bathroom before you sell.

If your kitchen and bathroom are in working order, an extensive remodel could be a mistake. Potential buyers might not like what you’ve done with the place, but they don’t want to change something that has just been renovated.  You are better off adjusting your price accordingly.

 

  • You’ll earn back what you spend on renovations.

Repairing things like your heating system, air conditioner or roof may help your home to sell faster, but you probably will not recoup what you spend. Per Remodeling Magazine’s 2017 cost-vs-value report, the only renovation that is likely to net you as much as you spent is adding fiberglass attic insulation. You will likely only get back 65.3% on a full kitchen renovation. And redoing your bathroom might get you 59.1%.

 

  • All the properties listed in the multiple listing service show up online.

Your agent must choose to let the listings show up online. Most do, but it’s a good idea to verify that yours will.

 

  • Open houses sell properties.

Homes rarely sell to buyers who have visited them during open houses.  Agents like to have open houses because it helps them to find additional potential customers.  If you and your agent opt not to have an open house, it probably won’t chances of selling.  On the other hand, having a broker’s open house for other agents might be worthwhile.

 

Additional Reading

http://www.desisowers.com/Blog/Knowing-When-Youre-Ready

http://www.desisowers.com/Blog/The-Best-Chance-For-Selling-Your-New-River-Valley-VA-Home

 

If you are interested in buying or selling a New River Valley home, contact Desi Sowers at 540-320-1328, and discover the difference she can make during your family's move. 

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