Helpful Tips for Negotiation
If we mentioned it once, we’ll mention it a thousand more times: Residential real estate transactions are complex and time-consuming. So now the time has come – you’ve gone through all the open-houses and showings, and finally found “the one.” It’s time to make an offer. And while this is where things can start to get complex, this one is for all the marbles. So fasten your seatbelt, your road to becoming a home owner is going to kick into high gear.
In today’s market, your offer is likely not the only offer on the seller’s plate. If your offer is chosen, the seller will still likely counteroffer, and the back-and-forth can potentially go on for many rounds.
The negotiation process during the transaction can get overwhelming, but your real estate agent should be able to confidently guide you through it, while at the same time put you in the best possible position commensurate with your needs and budget. Hence, for most questions regarding negotiations, we’d encourage you to lean on your agent as much as possible.
We especially want to see you get the home of your dreams at the right price and terms for you. The following are just a few tips that should help you come out on top in this competitive market…
Not only is a pre-qualification letter from your mortgage company required with an offer, it can help you out quite a bit with your negotiations. Did you know that sharing the maximum amount you are approved for could hurt your negotiations? For example, if you're offering a number under the listing price and the seller sees the higher amount you can borrow, it should only be expected that they’re probably not going to be inclined to agree to that lower price.
We actually recommend asking for two pre-qualifying letters from your mortgage provider: one with your ideal loan amount, and one with the max amount you can borrow. This way, if you find a house with a price tag slightly over your original budgeted amount, you can still stay “in the game” for the house you want. We’re sure you’ll agree that, when you’re at the negotiating table, anything that can increase your chances of success is a good idea.
Speaking of increasing your chances and letters, another good idea is to include a personal letter introducing yourself and your family with the offer you submit. While the real estate transaction itself is all about business, the sellers typically have strong emotional ties to their home and the neighborhood they’re about to leave. A personal letter from you might go a long way toward giving them the confidence that they're leaving their home and neighbors in good hands.
While personal letters are a growing trend, they are not yet something a lot of buyers do, so hopping on this trend now can go a long way toward helping set you apart from other offers. Your letter should include a little background about you and your family, what you love about the house and neighborhood, and why you’re ready to call this place “home.”
For the sake of conveying sincerity and your true personality, It’s a good idea to draft the letter yourself and then pass it along for your agent to review and include other relevant information they feel will help.
Be Ready to Haggle
Don’t be surprised, or frustrated, if there are a few rounds of negotiating before settling on a final price. And even after you’ve settled on the price, there could even be a few more rounds of negotiations before final closing. During this time it’s important to remember that while price is the biggest piece of the puzzle, it’s not the only piece. You will also be negotiating over things like a home warranty, a new carpet allowance, closing costs and more. All these factors are important, as they’ll mostly be covered by the seller, who will use them as leverage in an attempt to stay firm on price.
Another area of focus to expect continued negotiations on will be repair costs after the inspection. Major structural issues will represent a whole new level of challenge and conversation, but the more minor issues found during the inspection will likely be resolved relatively easily.
If you’re prepared for these renegotiations, the more likely you are to remain flexible and at ease during the entire process. While it’s easy to get frustrated, it’s important to stay focused on your goal: getting into the home you love.
At the end of the day, your real estate agent is the person most equipped to walk you through the entire negotiation process. While you’ll probably only go through this process a few times in your life, real estate agents going through the process several times a month. So go ahead and lean on them, and trust that they have your best interest at heart.
We hope you found this article helpful to better prepare yourself to seamlessly and successfully make your way through the real estate negotiating process.
*Certain states may prohibit a personal letter as a matter of law, so check with your real estate agent first.