When buying a home, you want to be as prepared as possible. This means doing a little “homework” before you get deep into the process. Here are a few tips to get started:
Understand The Real Estate Market
Understanding the real estate market in the area is key. Talk to your real estate professional about whether or not it is a good time to buy (a buyer’s market) or if the market favors sellers with little inventory to choose from.
Also look at what other homes in the area are selling for and compare them against the homeyou are interested in. Homes with similar features, of similar size and age, and in similar condition are the best comparables. Compare what they were listed for and what they actually sold for. Your agent can assist with this information and you can use it as a guidepost in your search and negotiations.
Be Open To Compromise
Very often, the first offer you make to a seller will not be accepted. In a neutral real estate market, buyers generally try to make an offer lower than what the seller will accept. As such, buyers should be prepared to either raise their offer, accept a counter offer, or in some cases, walk away from the home. Knowing your bottom line is critical at this stage of negotiations which is why getting a mortgage pre-approval is also important. Once you know how much the lender will allow, you know how much you can afford.
Negotiate On Things Other Than Price
Not all deals are won or lost based solely on price negotiations. If a seller won’t budge on the price, maybe they’ll consider including things not originally contemplated like appliances, hot tubs, security systems or other chattels.
You can also negotiate on the following:
- Completion date. Maybe the seller wants a short closing or a longer completion date. If
you have flexibility in your timeline, this can sometimes be accommodated.
- Subject conditions such as financing, home inspection or timing for the sale of the
buyer’s current home.
- Repairs needed to the home. If the inspection finds repairs are necessary, you can
negotiate a lower sale price to offset these costs, or have the seller complete the repairs
prior to closing.
- Closing costs such as legal fees or other associated costs.
Don’t Get Into Bidding War
It is easy to get caught up in a bidding war if you have fallen in love with a home. Don’t throwthe budget out the window to get the home “at any cost”. You want to make sure the home remains within your price range and be prepared to walk away if the price gets too high. Not only do you have a pre-approved mortgage with a top limit, but you don’t want to be house poor should you be the successful bidder.
Think about your other financial obligations like loans and personal debt, and also factor in what the ongoing costs of the home will be. Utilities, property taxes and maintenance all add to the monthly costs and if a home will put you in a financial bind, it’s often best to walk away.
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