How To Negotiate A Good Deal On Your First Home
Many first time home buyers who are interested in purchasing a home with no Realtor to represent them don’t know what to do next. First of all, you need to find a Realtor who will work in your best interests to get you the best price and terms such as a seller closing credit to pay for most or all of your closing costs and a favorable closing date which will correspond to your rent lease expiration date.
Currently, it is a seller’s market and buyers need to be aware that sellers can choose which offers to take and if you are offering zero down then you better put your best foot forward if you want a shot at getting your offer accepted. For example, if a home is listed at $100,000 and you offer $95,000 with 100% financing and seller paying $5,000 closing costs and another buyer is offering $95,000 with 20% down and asking the seller to pay zero closing costs…which offer would you take? Unfortunately, the seller is more inclined to take the offer with 20% down payment which is the reason why it is taking longer for first time home buyers to get an accepted offer on a home.
So what can you do? First, you need to submit an offer closest to list price as possible especially if you want the seller to pay closing costs. Most people don’t realize that every $1,000 increase in purchase price changes their monthly mortgage about $5 per month based on current interest rates so using the example above then your payment would only change $25 per month to offer full price with seller paying $5,000 closing costs. If you offer full price then your $100,000 purchase offer with $5,000 credit is now the same as buyer who offers $95,000 with zero closing costs because the seller will get $95,000 in both cases. Furthermore, if the other buyer has to sell a home first or he offers less than $95,000 then you will have the upper hand and win the bidding war to purchase the home.
Another thing I noticed in some cases that sellers can be “nice” and they want to help you get you get your first home but you must get pre-approved and show them a pre-approval letter if you want them to consider you to be a serious buyer. Beware, the worst thing you can do is look a gift horse in the mouth and negotiate too much with the seller. For example, the seller may be offering to sell some furniture and fixtures in the deal but you may get greedy and low-ball them with an unfair price for these items and they may walk away from your offer.
Another example, is asking for a carpet allowance when the carpet is perfectly fine but you may not like the color. The moral of the story is to work with a good Realtor who can negotiate the best price and terms on a house which meets your most important home buying goals but you must be able to give and take if you want a shot at owning a piece of the American Dream.