7 simple rules for negotiating your offer and getting that house
In Eastern CT, the rates are low, inventory is tight, and the desire to buy is high. In other words, the pressure is on! Now, more than ever, it is critical that you have some knowledge and a real estate professional by your side to help you seal the deal.
In your perfect world, you found the ideal home, there aren't any competing offers, the seller is happy with your offer, and you can spend the next few weeks wondering what color to paint the living room.
And it could happen. Many sellers accept the best offer they receive, and for a variety of reasons. But sellers are also known to reject offers for a variety of reasons. Or make counteroffers. This is especially likely if you bid low, or if you're up against multiple competing offers.
If you do receive a counteroffer, it's up to you to decide whether you want to accept the new contract, negotiate the terms, or walk away.
In cases such as these, look to your Realtor®. He or she is your professional guide. If you decide you want to negotiate—that is, make a counteroffer to the seller's counteroffer—your agent will use their negotiating skills to help get you the best deal. This is what agents do every day.
But you're not just going to sit there. If you understand what negotiating tactics your agent may deploy in this market, you can back them up and cheer them on.
Here are seven rules you should know before your Realtor® starts negotiating for you:
#1 Act Fast—Like, Now
When you receive a counteroffer, you should respond quickly—ideally within 24 hours. The longer you wait, the more space you leave for another buyer to swoop in and nab the property. Also? If a seller senses hesitation, they may decide to withdraw their counteroffer before you even have a chance to respond.
#2 Raise Your Price (Within Reason)
Before you make an offer, talk with your agent about how high you're willing to go if the seller doesn't accept your bid. While you obviously don't want to overpay for a house, you may have to up the ante—especially if you initially made a lowball offer. Lean on your agent's expertise to determine how much money you should add to the sales price to make it more enticing to the seller.
Then, through their powers of persuasion, your agent can make the counteroffer look even more attractive by pointing out similarly priced "comps"—recently sold homes in your area that are comparable in terms of square footage and features.
As your agent negotiates, it can feel like things are escalating quickly. It's stressful. You may feel a sudden urge to do whatever it takes to win.
Before you go overboard, there are two things you must keep in mind:
- You can't exceed the monetary confines of the pre-approved mortgage you received from your lender.
- You shouldn't overextend your budget.
Because your counteroffer has to be an amount you're comfortable spending on a home, you want that new house and to keep living your life. Plus: You're not out of options yet.
#3 Increase Your Deposit
Increasing your earnest money deposit (EMD)—the sum of money you put down to prove to the seller you're serious (i.e., "earnest") about buying the house—is another way to show the seller you have more skin in the game. A standard EMD is typically 1% to 3% of the sales price of the home. Making a counteroffer with a 3% to 4% deposit could be what you need to persuade the seller to side with you.
#4 Demonstrate Patience About Taking Possession
Depending on the seller's timetable, changing your proposed possession date—the date you take over the property—could butter them up, too. If the seller wants to stay in the home for a few days after closing, try offering a later possession date. You could also draw up a "rent-back" agreement, meaning the seller pays you rent for staying in the home for a set period of time after the closing date.
#5 Let Go of a Few Contingencies—With Care
Want to give your counteroffer an even bigger boost? Reduce the number of contingencies you're asking for. It's your way of saying, "Hey, look, I have fewer ways to back out," which gives the seller more reassurance that the deal will close.
But be selective: Some contingencies are too important to give up. A home-inspection contingency—the right to have a home inspection and request repairs—gives you an out if you spot major problems with the home (and protects you from buying a total money pit).
Ultimately, waiving contingencies depends on your market, your loan program requirements, your risk tolerance, and the circumstances of the house in question. And if you waive contingencies and then you find a problem, the seller isn't responsible for fixing it.
#6 Ask for Fewer Concessions
At a mortgage settlement, home buyers have to pay closing costs for taxes, lender's fees, and title company fees. Closing costs vary by location, but you can expect to shell out between 3% and 4% of the home's sales price. The seller pays an additional 1% to 3%.
When making an initial offer, you have the option to ask the seller for concessions—a settlement paid in cash to help you offset your share of the closing costs. (This move is less feasible if you're going up against multiple offers.)
Concessions effectively lower the seller's net proceeds from the sale. Making a counteroffer that removes the concessions you would have otherwise received at settlement puts cash back in the seller's pocket—and can improve your bid.
#7 Know When to Walk
When negotiating with a seller, trust your gut—and your agent. If he or she says a deal is bad for you: Listen.
And if you don't want to make any more trade-offs—and the seller won't budge—it's smart to walk. That can be a tough decision to make, and rightfully so! Negotiating is tough. It's draining.
And losing something you've worked hard to get can be disappointing. But don't worry. There's a deal for you out there. And after those strong feelings of frustration pass, you'll realize: Now I know how to do this.
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