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:
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.
- 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.
- 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.
- 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.
- 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.
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.
- 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.
- 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.
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.
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.
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.
- 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.