When I first started investing in real estate early in the last decade, it was a Seller’s market. Negotiating as a Buyer was difficult because Buyers were aplenty, borrowing was easy and houses flew on and off the market in a flash. Knowing this, Sellers often aggressively priced their properties. In this current Buyer’s market, now is the time to buy – on YOUR terms.
Don’t Just Negotiate List Price
I often see people negotiating a purchase on list price alone. The Buyer offers below the list price, the Seller counters, the two meet somewhere in the middle and eventually the deal is done. This is the most common way I see a real estate transaction happen. The Seller reaches that “magic number” and meanwhile the Buyer could have done much better. There are other tactics Buyers can use when negotiating.
An Earnest Deposit is an amount that the Buyer is willing to put down in the case that they back out of the transaction. If the Buyer backs out, they forfeit this deposit. It’s also an indication to the Seller as to how serious the Buyer is. If you offer an aggressive price and put down a high Earnest Deposit, this will show the seller that you’re serious to buy and also give you negotiating room; the Seller may be urged to counter with a less aggressive price for the home. Fluctuate the amount of the Earnest Deposit as you are countering with the Seller.
While most closing costs rest with the Buyer, there are costs that the Seller incurs such as, in Pennsylvania, a transfer tax. While both the Buyer and Seller each must pay 1% of the final price as a transfer tax, a nice tool for you as negotiating gets deeper is to offer to pay THEIR transfer taxes. Using this tactic in tandem with an aggressive offer and the Earnest Deposit in the mix may get you into the house at an overall lower price.
ALWAYS opt-in for a full home inspection. It will allow you to negotiate the price (or request for repairs to be made) and also predict future problems. Your home inspector will provide you with a detailed report consisting of urgent concerns and others that can wait. Either way, if you’re willing to take care of some of these items yourself, send a new offer to the Seller in the way of a reduced sales price. Put a dollar figure on ALL of the items the home inspector flags, take it to the Seller and you should either get most of the items remedied or get yourself into the home for less. In this market, many Sellers will not risk losing an interested Buyer by rejecting a reasonable counter offer due to home defects.
Don’t ever, ever, ever get emotionally attached to a property. You will lose money this way because you will settle for less and pay more. Detach your emotions, treat it as the business transaction that it is, keep engaged with your agent, allow the process to have consistent forward momentum and the transaction will eventually work itself out.
Sam Gorgone, Hometown Property Management Services, LLC