Calling All Bargain Hunters: 4 Items That Are Always Negotiable When Buying a Home
You’ll find yourself in the role of the home negotiator at some point in the process, regardless of whether you’re the one buying or selling the property.
Because real estate transactions are transactional in nature, there will always be things that both parties want to bargain for, and some of these things may even be necessary to close the deal. However, if you are a buyer, you may be wondering whether or not you are still able to negotiate in this type of market.
According to Nicole Beauchamp, a global real estate adviser, and associate broker with Engels & Volkers, “It is still OK to ask for things when buying a home, even in a highly competitive market.” “The most important thing is to have a good understanding of what aspects can be negotiated.
Then, what exactly are those components? When it comes to real estate, nearly everything is open to discussion and possible negotiation. One of the real estate agents that we talked to mentioned that somebody even tried to convince a buyer to take the seller’s horse as part of the transaction. (The buyer did not proceed.) But we’re not playing any games here! When it comes to purchasing a home, the following are the four most common areas in which room exists for negotiation.
1. The asking price for the property
Although it may appear to be self-evident, the price at which a home is sold is, in the end, entirely up to the buyer and seller. This fact should be mentioned in every article on the subject of negotiating in the real estate market. The factors of supply and demand are ultimately responsible for determining the selling price that a buyer and seller will settle on.
2. Earnest money deposit
The buyer’s offer must be accompanied with a deposit of good faith, which is referred to as an earnest money deposit. And homebuyers will lose their deposits if they do not have a valid justification for withdrawing from a transaction after their offer has been accepted.
According to Jason Gelios, a real estate agent with Community Choice Realty in Southeast Michigan, “In order for some homebuyers to reinforce their offer, they will increase the size of their deposit to show the seller they mean business.” “As an illustration, a purchase agreement may stipulate an offer price of $100,000, and the buyer may propose an earnest money deposit of $1,000 as their “skin in the game.”
A down payment, on the other hand, is money that is specifically applied toward the mortgage. Earnest money is not the same thing. Earnest money is a deposit that will be credited to the buyer at the time of closing; it is not considered an additional fee.
One method of haggling that is definitely worth a shot is attempting to negotiate the amount of the earnest money deposit that the homebuyer is willing to add to the offer.
3. “Money” returned at the end of the day
The concept of “money” back at closing can be a little bit confusing to grasp.
But to put it more simply, it’s a method for the buyer to end up with a bit extra liquid cash in the process of purchasing a house by getting assistance from the sellers to offset the costs of closing. This assistance typically comes in the form of a seller credit. You do not physically receive cash from the seller, but you do receive funds from the seller, which may result in a little larger amount of cash being in your possession when the transaction is complete.
As an illustration to help clarify this method of bargaining, Hale provides the following scenario.
Suppose you see a house that you like but it costs $500,000 and you want to buy it. You will need $125,000 in cash if you wish to submit a 20% down payment ($100,000) and have 5% for closing costs ($25,000). If you had a savings account containing $145,000, you would have $20,000 remaining after the closing on the home you purchased.
But if the buyers needed even more cash left over after paying for the house, they might propose to pay $510,000 for the house and then ask for $10,000 back in cash from the seller. This would give them even more liquidity for unexpected costs and living expenses.
Due of the circumstances, the down payment and closing fees would be significantly more (coming in at $127,500). However, you would have an additional $10,000 for closing fees if the seller consents to the higher price and an appraiser confirms that the home is worth the higher amount. In addition, after the purchase, you would have a surplus of $27,500 rather than the surplus of $20,000 that you would have had in the first scenario.
According to Hale, “in that illustration, a property seller still nets the same amount—in this case, they walk away with $500,000.” “And the additional cash funds helps you, as a buyer, get more money upfront to spend now, which can help because it takes a fair chunk of cash to buy a home even when you’re financing it,” says the seller. “And the extra cash funds helps you, as a buyer, get more money upfront to use now.”
4. Interest rates on mortgages and associated costs
The negotiation of this matter will probably take place between the two of you and a mortgage broker. Additionally, it may have a big impact on your ability to buy a house.
According to Gelios, a homeowner who is interested in getting authorized with a lender should ask the appropriate questions. “Such as why they were offered the exact rate to how high the closing charges are,” “Such as why they were provided the specific rate,”
Not only are there multiple programme possibilities that could be provided by other lenders, but the same programs could also have varying interest rates. Therefore, you should always talk to a minimum of two different lenders in order to obtain a second opinion and to negotiate the best rate possible.
Another form of negotiation that may take place in this field is the possibility, according to Gelios, that a seller may pay a portion of the buyer’s closing fees. This type of arrangement is known as a concession.
