Hi, everyone! Matt here, and today I’m bringing you a bit of expert advice on the art of negotiation and handling the initial offer for a first time home buyer. It’s no surprise to anyone that this can bea daunting stage of purchasing a home, and if you’re anything like me you want to be as prepared as possible. Possessing the knowledge beforehand to successfully negotiate a sale can mean the difference between over-paying thousands for a home and getting a great deal. Who doesn’t want that? Keep reading to learn more.
You’ve done your footwork. Home after home you’ve perused, carefully examining each nook and corner, crevice, hallway and fixture, all while imagining where you’ll be able to store your oversized collection of novelty shot glasses and coffee mugs. You’ve found the perfect house and are literally surged with excitement at the thought of being a home owner, but there is one crucial process that’s standing in between you and the home of your dreams—The Offer. The word itself brings a conjuring to the imagination: approvals, negotiations, and timing–all difficult concepts to grasp for a first time home-buyer. Luckily for you, we here at Goodrich Residential are bursting with the information needed to grab the metaphorical Offer-Bull by the horns and tackle it to the ground.
An accepted offer will eventually become what Realtor.com calls the “blueprint for the final sale.” As a binding contract it is imperative that as much financial and contingent information as possible is presented with the initial offer. Items such as transitional utility prorating (who pays what during the closing), state requirements, and a time limit should often be included in the offer. An oversight of one or more of these important facets can lead to unexpected costs or conflict. Your agent at Goodrich Residential will always assist you with the offer details to make the process as seamless as possible, but you should be aware of the comprehensive nature of the initial offer beforehand.
Just as knowing what an offer contains is important, it is also essential that you come to the negotiation table pre-approved for a mortgage. You’re much more attractive to the seller and in a better position to negotiate if you have financing in order and come with a hard-cap limit on spending. Hud.gov recommends checking out one of the many mortgage calculators online to get an estimate on how much you may be able to afford based on monthly payments, and from there begin your shopping process. Remember that this can take up to 3 to 6 weeks to complete once you’ve chosen a lender, sothis should be completed as early as possible.
Having already done that, because you’re a well-informed, conscientious buyer who happens to read our extremely informative blogs, there are several missteps that can delay or even derail your negotiations. Below are some of the more common.
1. Not doing the research
Discovering the sales prices and market time of comparable homes in the area can provide enormous insight into the local market. Our professionals here at Goodrich Residential can readily provide that information during the home-buying process and help you understand the climate of your potential neighborhood. You can never have enough information concerning home prices in the area. Knowing this might help you realize the seller’s motivations and provide leverage for your offer, which leads us directly to number two.
2. Failing to understand the seller A good negotiator understands that negotiations are a two-way street. Looking at the deal from the perspective of the seller might provide you with clarity needed to present a successful initial offer—mainly, what are the seller’s motivations? Maybe the sale needs to happen imminently as the seller is moving to another city and has already bought a home, or perhaps the local real estate market is weaker than the national one. US News’ Real Estate blog gives us these examples and recommends collecting as much publicly available information about the home as possible. But be warned, there might be a situation in which the seller is doing the same for you.
3. Tunnel vision
Here’s one folly that plagues nearly all first-time homebuyers. Falling in love with a single property, while exciting, might allow the seller to take advantage of your position. If your sights are set on only one home you’re more willing to acquiesce to a seller’s demands and more likely to pay top dollar. Having options within your Goldilocks Zone grants you the luxury of not being consumed by the thought of losing a specific property. Extra bonus: letting the seller know you’re interested in other homes grants you additional leverage during negotiations.
4. The dreaded lowball
We take it as common knowledge that a successful negotiation begins with an underpriced offer, followed by a counter-offer, and continuing in a pattern until an agreement is reached. However many first time homebuyers mistakenly believe they can get the best possible price by initially coming in extremely low. Sellers will often refuse to deal with such offers as they may be insulted, or view the buyer as non-serious, during which time the home may be sold to a higher bidder. It’s best to come to the negotiation table ready to make a serious first offer rather than suffer the thought of losing out on the property.
5. Getting caught in the game
Sometimes you just need to pull the trigger. It’s important to remember that the end goal is to buy a home—not hone your negotiation skills over a few thousand dollars. Missing out on the chance to be a homeowner because a seller didn’t drop to your expected negotiation price can be devastating to a buyer. “It becomes an ego thing,” says Daniel Shapiro, associate director of the Harvard Negotiation Project. “I hear a lot of situations where real estate deals fail because one side or the other refuses to come down another $5,000.” If the price has come down to within your budget, and you really like the property, pull the trigger.
As you can see, the art of negotiation contains many nuances of concession and leverage. It can be a minefield for the first time homebuyer and an intimidating part of the process. We all want the best possible price for a property, but that price comes with knowledge, patience, and a little help from those who know the most—like us here at Goodrich Residential.