First time homebuyers are hit with a slew of firsts. Whether it’s picking a real estate agent or deciding what neighborhood you want to live in, the home buying process can be very daunting.
Once you find an agent and the home of your dreams you may feel like the hard part is over. However, you’ll need to be prepared for the potentially grueling process of offering and negotiating before you pack up your things.
The first thing you’ll need to know about making an offer and negotiating on a home purchase is what your bargaining chips are. Even though the seller has a list price set at what they hope to get, you can do more than just offer more or less.
The most common bargaining chip you can use to negotiate with a seller is closing costs. Closing costs include legal and tax fees associated with buying a home and usually total between 2 and 4 percent of the total sales price of a home. If a home is just slightly out of your price range or you feel that it is over priced, try negotiating with the seller to cover the closing costs.
Even though a few thousand off may not sound too enticing, closing costs are fees that must be paid up front and therefore may not be desirable for someone with little to no up-front money for a home purchase.
Another big bargaining chip that not many homebuyers take advantage of is a home inspection. If you’re really set on a home but it seems that the seller is unwilling to negotiate on price, show your interest by making an offer contingent upon a home inspection.
Families living in a home for a number of years have a tendency to exaggerate the price in their mind and become very stubborn on asking price. Making a realistic offer as well as scheduling a group home inspection can expose the problems to both the seller and the buyer so they are more aware of the merchandise and can negotiate more sensibly.
Home inspections are also a great way to find a third bargaining chip that homebuyers shouldn’t be afraid to ask about. No home is perfect and there are always repairs that could be done, but finding something important like faulty wiring, moisture in the basement or roofing problems pose an expensive threat to the future homeowner.
Whether it’s fixing the foundation or simply updating the flooring let these repairs serve as bargaining chips in your offer. If the owner is unwilling to fix a wiring problem that a contractor estimates to cost $7,000, ask that the price be reduced by that much instead. Obvious and documented repairs can help you get the best price on a home that is fully up to code.
First time homebuyers are often overwhelmed by the price of homes in their desired neighborhood. One common rookie mistake is to find a home outside of your price range and offer a drastic amount below asking price and hope for the best.
Although there is nothing wrong with making a strong negotiation, you shouldn’t outrageously low-ball the asking price on purpose. If you’re seriously interested in a home, make a solid offer so the seller takes you seriously. Nothing is worse than making a really low offer on a dream home to get completely rejected and ignored by the seller.
Another common mistake first time homebuyers make is completely skipping the negotiation phase completely. If the home is priced competitively and you’re very interested there is nothing wrong with paying full price or even offering slightly above asking, but take advantage of the buyers market and at least try to negotiate out a deal with closing costs.
The best advice for anyone about to go into the negotiation process on a new home is to expect the unexpected and be flexible. Don’t expect the seller to settle at half price just like you wouldn’t expect the seller to want you to pay $50,000 over asking. Use tools like home inspections and closing costs to simplify the negotiations as well as the moving process.
To learn more about the homebuying process as a first-time homebuyer check out this helpful guide.