Avoiding negotiation mistakes when making an offer on a home
Anyone looking to buy a home can expect some negotiation to be involved in the process. Even if the buyer and seller can quickly come to an agreement on the price, they'll still have to deal with factors such as when the buyer can take possession, how the closing costs will be paid, and what items may be staying at the property when the seller moves out.
Buyers will be interested in getting the best possible deal for a fair price. While a bit of give-and-take is part of any negotiation, some common errors can easily compromise an offer or scrap it entirely.
The price is one of the most important parts of the home offer, and can also lead to the most conflict. The seller is trying to get the best possible price for their property, but the buyer won't want to overspend and will frequently make an offer lower than the seller's asking price.
Going too low with the price can easily prompt a rejection. Cathie Ericson, writing for Realtor.com, says sellers usually have a bottom-level price they'll be willing to accept. If a buyer starts well below this point, a seller might believe that they're ignorant of market conditions or simply trying to take advantage of the seller.
After the initial offer, the seller may issue a counteroffer. Buyers can choose to submit their own counteroffer to this figure, but should be cautious about doing so. Elizabeth Weintraub, writing for the financial site The Balance, says it will take time for each party to draw up and consider their counteroffers. If another buyer makes an offer the seller prefers during that time, they can simply cancel the negotiations on the first offer.
The seller can also get frustrated if the buyer haggles by changing the price in incremental amounts. Ericson says this process will also lengthen the process and give the seller time to consider other offers. Leanne Potts, writing for the home improvement site HouseLogic, says insisting that the price be dropped by a few thousand dollars won't save a buyer much money anyway; over the course of a 30-year loan, the savings may be enough to buy an extra cup or two of coffee every month.
A one-shot offer can also backfire. Ericson says this occurs when a buyer puts forth a price and says they won't budge on it. Sellers may simply choose to turn it down, particularly if the price is unrealistic or if their home is in a strong seller's market.
At the same time, buyers shouldn't be so eager to buy a home that they overlook faults that reduce its value. Potts says waiving contingencies such as a home inspection or appraisal may make your offer more attractive to the seller. However, these steps can also turn up defects with the residence or reveal that it's not worth as much as the seller is asking. If you don't do this due diligence, you may end up paying too much for the property.
Try to get a sense of how much you'll need to spend on landscaping, repainting, or other efforts to spruce up the home. These costs can add up to a considerable sum, any may affect how much you're willing to pay to purchase the property.
Don't forget to check how long the home has been on the market, and compare it with the typical listing time in the market. Brittany Anas, writing for the home design site Apartment Therapy, says it's better to make a strong offer on a property that hasn't been listed for too long. If the listing has been lingering for several weeks, the seller may be more willing to budge on the price and other issues.
Avoid tipping your hand. Andreana Lefton, writing for the home improvement professional Bob Vila, says responding too quickly to a seller's counteroffer may hint that you're eager to purchase the property. Anas says buyers can also ask lenders to tailor a pre-approval letter for each offer or counteroffer they make, since presenting a single pre-approval letter may show that the buyer can afford considerably more than they're offering.
The little things
Home sales can easily collapse over minor issues. Buyers should contemplate whether a dispute is important enough to risk losing a home over.
A home inspection will usually uncover some flaws with the home, and a buyer can use this report to ask a seller to repair the issues or reduce the price accordingly. Potts says many repairs can be completed with minimal expense, so buyers may simply offer to complete some work on their own instead of entering tedious negotiations over what a seller will fix.
Necessary repairs shouldn't scare you away from a property if you enjoy other aspects of it. If you're happy with the home's layout, location, and other major factors, you should seriously consider making an offer.
Realize that sellers aren't obligated to address everything the buyer dislikes about the home. While major issues unveiled by an inspection report can be used to further negotiate the price, buyers shouldn't expect sellers to accede to a request to remove wallpaper or install central air conditioning.
Sellers are often willing to include some appliances or furniture in the home sale. After all, this can enhance the appeal of the property and helps cut down on the amount of stuff they'll have to move.
However, buyers should always ask what will be included in the sale so they aren't blindsided by the disappearance of a refrigerator or chandelier after closing. Ericson says buyers can also offer to purchase items in a separate transaction from the home sale. Avoid making the offer contingent on including certain items in the sale; sellers may perceive buyers who do so to be greedy.
Flexibility can be even more important than a high price for some sellers. Anas says buyers can often win over a seller if they are willing to move up the closing date or give the seller the option to rent the property after closing. These steps can help give the seller more time to find their next residence and move there.
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