Negotiate Your Best House Buy

Keep your emotions in check and your eyes on the goal, and you'll pay less when purchasing a home.

Buying a home can be emotional, but negotiating the price shouldn't be. The key to saving money when purchasing a home is sticking to a plan during the turbulence of high-stakes negotiations. A real estate agent who represents you can guide you and offer you advice, but you are the one who must make the final decision during each round of offers and counter offers.

Here are six tips for negotiating the best price on a home.

1. GET PREQUALIFIED FOR A MORTGAGE
Getting prequalified for a mortgage proves to sellers that you're serious about buying and capable of affording their home. That will push you to the head of the pack when sellers choose among offers; they'll go with buyers who are a sure financial bet, not those whose financing could flop.

2. ASK QUESTIONS
Ask your agent for information to help you understand the sellers' financial position and motivation. Are they facing foreclosure or a short sale? Have they already purchased a home or relocated, which may make them eager to accept a lower price to avoid paying two mortgages? Has the home been on the market for a long time, or was it just listed? Have there been other offers? If so, why did they fall through? The more signs that sellers are eager to sell, the lower your offer can reasonably go.

3. WORK BACK FROM A FINAL PRICE TO DETERMINE YOUR INITIAL OFFER
Know in advance the most you're willing to pay, and with your agent work back from that number to determine your initial offer, which can set the tone for the entire negotiation. A too-low bid may offend sellers emotionally invested in the sales price; a too-high bid may lead you to spend more than necessary to close the sale.

Work with your agent to evaluate the sellers' motivation and comparable home sales to arrive at an initial offer that engages the sellers yet keeps money in your wallet.

4. AVOID CONTINGENCIES
Sellers favor offers that leave little to chance. Keep your bid free of complicated contingencies, such as making the purchase conditional on the sale of your current home. Do keep contingencies for mortgage approval, home inspection, and environmental checks typical in your area, like radon.

5. REMAIN UNEMOTIONAL
Buying a home is a business transaction, and treating it that way helps you save money. Consider any movement by the sellers, however slight, a sign of interest, and keep negotiating.

Each time you make a concession, ask for one in return. If the sellers ask you to boost your price, ask them to contribute to closing costs or pay for a home warranty. If sellers won't budge, make it clear you're willing to walk away; they may get nervous and accept your offer.

6. DON'T LET COMPETITION CHANGE YOUR PLAN
Great homes and those competitively priced can draw multiple offers in any market. Don't let competition propel you to go beyond your predetermined price or agree to concessions-such as waiving an inspection-that aren't in your best interest.

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G.M. Filisko is an attorney and award-winning writer who has to remind herself to remain unemotional during negotiations. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.

Article From Houselogic.com

By: G. M. Filisko

Published: June 04, 2010

Reprinted from HouseLogic (houselogic.com) with permission of the NATIONAL ASSOCIATION OF REALTORS (R).Copyright 2010. All rights reserved.

How to Use Comparable Sales to Price Your Home

Before you put your home up for sale, use the right comparable sales to find the perfect price.

How much can you sell your home for? Probably about as much as the neighbors got, as long as the neighbors sold their house in recent memory and their home was just like your home.

Knowing how much homes similar to yours, called comparable sales (or in real estate lingo, comps), sold for gives you the best idea of the current estimated value of your home. The trick is finding sales that closely match yours.

WHAT MAKES A GOOD COMPARABLE SALE?

Your best comparable sale is the same model as your house in the same subdivision-and it closed escrow last week. If you can't find that, here are other factors that count:

Location: The closer to your house the better, but don't just use any comparable sale within a mile radius. A good comparable sale is a house in your neighborhood, your subdivision, on the same type of street as your house, and in your school district.

Home type: Try to find comparable sales that are like your home in style, construction material, square footage, number of bedrooms and baths, basement (having one and whether it's finished), finishes, and yard size.

Amenities and upgrades: Is the kitchen new? Does the comparable sale house have full A/C? Is there crown molding, a deck, or a pool? Does your community have the same amenities (pool, workout room, walking trails, etc.) and homeowners association fees?

Date of sale: You may want to use a comparable sale from two years ago when the market was high, but that won't fly. Most buyers use government-guaranteed mortgages, and those lending programs say comparable sales can be no older than 90 days.

Sales sweeteners: Did the comparable-sale sellers give the buyers downpayment assistance, closing costs, or a free television? You have to reduce the value of any comparable sale to account for any deal sweeteners.

AGENTS CAN HELP ADJUST PRICE BASED ON INSIDER INSIGHTS

Even if you live in a subdivision, your home will always be different from your neighbors'. Evaluating those differences-like the fact that your home has one more bedroom than the comparables or a basement office-is one of the ways real estate agents add value.

An active agent has been inside a lot of homes in your neighborhood and knows all sorts of details about comparable sales. She has read the comments the selling agent put into the MLS, seen the ugly wallpaper, and heard what other REALTORS, lenders, closing agents, and appraisers said about the comparable sale.

MORE WAYS TO PICK A HOME LISTING PRICE

If you're still having trouble picking out a listing price for your home, look at the current competition. Ask your real estate agent to be honest about your home and the other homes on the market (and then listen to her without taking the criticism personally).

Next, put your comparable sales into two piles: more expensive and less expensive. What makes your home more valuable than the cheaper comparable sales and less valuable than the pricier comparable sales?

ARE FORECLOSURES AND SHORT SALES COMPARABLES?

If one or more of your comparable sales was a foreclosed home or a short sale (a home that sold for less money than the owners owed on the mortgage), ask your real estate agent how to treat those comps.A foreclosed home is usually in poor condition because owners who can't pay their mortgage can't afford to pay for upkeep. Your home is in great shape, so the foreclosure should be priced lower than your home.

Short sales are typically in good condition, although they are still distressed sales. The owners usually have to sell because they're divorcing, or their employer is moving them to Kansas.How much short sales are discounted from their market value varies among local markets. The average short-sale home in Omaha in recent years was discounted by 8.5%, according to a University of Nebraska at Omaha study. In suburban Washington, D.C., sellers typically discount short-sale homes by 3% to 5% to get them quickly sold, real estate agents report. In other markets, sellers price short sales the same as other homes in the neighborhood.

So you have to rely on your REALTOR's knowledge of the local market to use a short sale as a comparable sale.

MORE FROM HOUSELOGIC

What You Must Know About Home Appraisals

6 Reasons to Reduce Your Home Price

OTHER WEB RESOURCES

New York State: "How Estimates of Market Value are Determined for Residential Properties"

What's the Value of a View? Research from Texas Christian University

Carl Vogel, a freelance writer and former editor of The Neighborhood Works magazine, lives in a home in Chicago that is not typical of those nearby, so he appreciates a savvy comp.

Article From Houselogic.com

By: Carl Vogel

Published: August 05, 2010

Reprinted from HouseLogic (houselogic.com) with permission of the NATIONAL ASSOCIATION OF REALTORS (R).Copyright 2010. All rights reserved.

The dance begins: Negotiation to buy a home

Provided by Coldwell Banker®

You've found the home of your dreams. So how do you snatch it for the price you're willing to pay? Making an offer is an art.

You could offend a seller with an unreasonably low price or reference out-of-date market information, says Bob Irwin, author of the book "Tips and Traps When Negotiating Real Estate."

Of course there is no one, surefire tactic, but here are some common tips for gaining the upper hand:

Learn about the seller's situation.
Having a clear understanding of the seller's big picture will help you determine how badly or quickly he or she needs to sell the home. That may indicate how much room exists to adjust your bid price, says Julie Reynolds, spokeswoman for Realtor.com.

Does the seller have a contingent offer on another home that depends on this deal? Are they selling to relocate for a job? Are they trying to avoid foreclosure? Is the family emotionally attached to the house?

A seller who owns the house without a mortgage may be able to accept a slightly lower price than an owner who has to pay off a hefty loan upon a sale.

Research nearby sales prices.
It's important to do your homework to find out how much comparable houses in the area are selling for and how many days they're on the market. The more recent the sale, the better the benchmark. There are a variety of websites that offer this information, including realtor.com, zillow.com, and trulia.com.

Survey the house.
Sure, it may look like the home you've always imagined you would grow old in, but be on the lookout for red flags that can lead to big problems down the road, such as black mold, cracked foundations or roof decay. You can ask the seller to price the cost of the repairs into the deal.

"At the end of the day, the house may not be worth it when you realize its true condition," Irwin said. "Know what you're buying."

Don't low-ball.
Don't insult the seller with a price that is far too low, especially if the house has just been listed for sale. You don't want to short-circuit negotiations from the get-go. Be realistic and offer a price below what they're asking but above what they would balk at.

Don't be desperate.
No matter how small the selection, you shouldn't decide that a particular house is the only one for you. By remaining detached you will be less likely to pay top dollar and will be in a better negotiating position.

Get pre-qualified.
Know what you can afford, and remember that you may have to put down a large percentage of the purchase price. A preapproval letter from a lender shows you are serious and able to come through on the deal.

Negotiate closing and escrow costs.
Closing costs include things like city and county property taxes, attorney fees, title and insurance. This is an area open to negotiation that can save you a lot of money, but can also feel like an endgame in chess. If the seller doesn't have an obligation to pay off their mortgage once the deal closes, they may be more likely to budge on this.

Request contingencies.
Ask for a reasonable period of time for a home inspection and title approval, as well as geological and pest reports. You may be able to use information from those reports to justify a lower price.
Meanwhile, find out if you are allowed a loan contingency in the contract that will protect you until the deal is closed.

"Buyers are often going into negotiations assuming that they'll be able to renegotiate based on what inspections will show," Irwin said. "It's a buying strategy that many people use, and the seller may even expect that."

Strike while the iron's hot.
Real estate is often highly competitive. Act quickly if the deal is good, or else someone else will. Visit many homes so that you'll recognize what you want when you see it. Even in a slow market, it's a bad idea to procrastinate.

Consider a fixer-upper.
If you find you're priced out of the market, you may be able to find a home in a good neighborhood that's in poor condition. If you're willing to put the sweat and a little more money into it, it could be worth your while.