When you make an offer to buy a house, you’re certainly hoping to get the best price and terms. To do that, you need to know where you can and cannot negotiate.
Consider the 12 tips below to create opportunities for a rewarding and successful negotiation.
Demonstrate your financial qualifications
Whether you plan to finance your purchase or pay cash you need to get your finances in order before you submit an offer. If you plan to pay cash have a proof of funds letter in hand. If you plan to obtain a mortgage you will want to obtain a strong prequalification letter or better yet a loan commitment letter from a reputable lender. Your offer will be much more attractive to a seller if the seller knows that you have the financial ability to purchase the home.
Base your offer on the home value, not the list price
The recent sales in the neighborhood give you and your Realtor ammunition and information. If a home is priced at or below market value, you are less likely to get a substantial reduction. If the home is priced above market value and has been on the market for a while, a lower offer accompanied by a market analysis may be acceptable to the seller. When you present the offer include with it a defensible opinion of value based on market data. A good Realtor or an appraisal company can be invaluable in crafting a compelling opinion of value.
Move quickly once you find the right house
If you see a home you like, be prepared to move fast. When a quality property is offered for sale it can go very quickly. If you’re in a competitive market, make your first offer one that represents market value. There will always be people who want to make below market offers. Submitting an offer that is too far under market value will impede your ability to negotiate. If there are competitive offers you may not get another chance to improve your offer and may risk losing the property.
Include an expiration with your offer
Moving quickly is a two way street. Determine a realistic time frame that the seller can respond within. I recommend no more than 48 hours from submission to require a response. If the seller is accessible they should be able to respond within a reasonable period of time.
Submit your offer in writing (avoid verbal offers)
A verbal offer conveys only a passing interest in a property. A seller needs to know that you are negotiating in good faith and that should reasonable terms be reached you are highly interested in contracting on the home. Your Realtor should provide you with a Residential Purchase and Sale Agreement.
Include photo copies of your due diligence check and earnest money deposit with your offer
In North Carolina a typical offer to purchase will require both a due diligence payment made direct to the seller and an earnest money deposit to be held in a trust account. Show the seller you are well prepared for the purchase and that you have funds at the ready. A buyer who is not prepared with initial deposits conveys a lack of awareness of the requirements set forth in the Residential Purchase and Sale Agreement.
Remove as many contingencies as practical
Don’t fill your offer with a large number of contingencies. This is not to say that zero contingencies should be included. You will want to ensure that you limit your liability by using necessary contingencies; however, it is important to demonstrate that should your offer be accepted you have both the desire and capability to close on the home.
Strive for a closing date that satisfies both you and the seller
A compelling offer will create a win/win scenario for the buyer and seller. If you have flexibility in your proposed closing date convey that to the seller. Better yet have your Realtor ask the seller for his or her ideal closing date. If you can request a date that is ideal for the seller and one that does not negatively impact you as the buyer you will clear a potential hurdle.
Commit to finalizing the property inspection(s) on an achievable but quick timeline
Consider the age and condition of the home to determine what inspections will be necessary to protect your interests. In some hot markets, prospective buyers do an inspection before making the offer so they can submit an offer with fewer contingencies; however, this may not always be possible or practical. Contact your inspector(s) in advance to determine when inspections can be completed. Don’t ask for more time than is truly necessary.
Determine the seller’s motivation to sell and seek out a win win.
Before you make your offer find out what is most important to the seller. Will the seller be motivated by a quick closing, a short due diligence period, a specific earnest money deposit, a trusted lender commitment, limited contingencies, etc. The more you know about the seller, the more you can tailor your offer to fit his/her needs. Put your Realtor to work to help you gather information about the seller and submit an offer that represents your interests while still achieving a win/win.
Convey your interest in the property to the seller
Some Realtors will suggest that a buyer write a personal letter to the seller. Consider submitting this letter with your offer. A personal letter can be endearing and may be the deciding factor in an acceptance or rejection. If you decide to send a letter with your offer use caution so that it does not limit your ability to negotiate.
Consider using a Realtor to help you successfully negotiate you home purchase
With home listings so accessible online, you may think you don’t need a Realtor. It’s easy to find a house online, but it’s harder than it appears to get from offer to closing. A good agent, with knowledge of market values, a proven track record of successful transactions, and tested negotiation experience can make the difference between a successful purchase and a deal that falls apart. In most cases, buyers pay nothing to use a Realtor as the real estate commissions is covered by the listing firm.
I hope that you found these tips to be helpful. If we can help further I would welcome the opportunity to connect you with a great Realtor. Simply click here to connect with a Realtor who specializes in your area of interest.
Owner & BIC