Negotiating and
Closing a Good Deal - Q & A
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Q:
Is
a low offer a good idea?
A:
While your low offer in a normal market might
be rejected immediately, in a buyer's market a
motivated seller will either accept or make a
counteroffer.
Full-price
offers or above are more likely to be accepted
by the seller. But there are other considerations
involved:
* Is the offer contingent upon anything, such
as the sale of the buyer's current house? If
so, a low offer, even at full price, may not
be as attractive as an offer without that condition.
* Is the offer made on the house as is, or does
the buyer want the seller to make some repairs
or lower the price instead?
* Is the offer all cash, meaning the buyer has
waived the financing contingency? If so, then
an offer at less than the asking price may be
more attractive to the seller than a full-price
offer with a financing contingency.
Q:
What
contingencies should be put in an offer?
A:
Most offers include two standard contingencies:
a financing contingency, which makes the sale
dependent on the buyers' ability to obtain a loan
commitment from a lender, and an inspection contingency,
which allows buyers to have professionals inspect
the property to their satisfaction.
A
buyer could forfeit his or her deposit under
certain circumstances, such as backing out of
the deal for a reason not stipulated in the
contract.
The
purchase contract must include the seller's
responsibilities, such things as passing clear
title, maintaining the property in its present
condition until closing and making any agreed-upon
repairs to the property.
Q:
How
is the price set?
A:
It's very important to price your home appropriately
according to current market conditions. Because
the real estate market is continually changing,
and market fluctuations have an effect on property
values, it's imperative to select your list price
based on the most recent comparable sales in your
neighborhood.
A
comparative market analysis provides the background
data upon which to base your list-price decision.
Study the comparable sales material presented
to you by the different agents you interviewed
initially. When you prepare to sell and are
interviewing agents, study each agent's comparable
sales report (the data should be no more than
three months old).
If
all agents agree on a price range for your home,
go with the consensus. Watch out for an agent
whose opinion of value is considerably higher
than the others.
Q:
Are
low-ball offers advisable?
A:
A low-ball offer is a term used to describe an
offer on a house that is substantially less than
the asking price.
While
any offer can be presented, a low-ball offer
can sour a prospective sale and discourage the
seller from negotiating at all. Unless the house
is very overpriced, the offer will probably
be rejected.
You
should always do your homework about comparable
prices in the neighborhood before making any
offer. It also pays to know something about
the seller's motivation. A lower price with
a speedy escrow, for example, may motivate a
seller who must move, has another house under
contract or must sell quickly for other reasons.
Q:
Are
interest rates negotiable?
A:
Some lenders are willing to negotiate on both
the loan rate and the number of points but this
isn't typical among established lenders who set
their rates like large corporations set the prices
on their goods. Nevertheless, it pays to shop
around for loan rates and know the market before
you go in to talk to a lender. You should always
look at the combination of interest rate and points
and get the best deal possible.
The
interest rate is much more open to negotiation
on purchases that involve seller financing.
These usually are based on market rates but
some flexibility exists when negotiating such
a deal.
When
shopping for rates, look for published rates
in local newspapers or check the growing number
of Internet sites that publish such information.
Begin by asking any questions to Metro Mortgage
Partners.
Q:
Can
you buy homes below market?
A:
While a typical buyer may look at five to 10 homes
before making an offer, an investor who make bargain
buys usually go through many more. Most experts
agree it takes a lot of determination to find
a real "bargain." There are a number
of ways to buy a bargain property:
* Buy a fixer-upper in a transitional neighborhood,
improve it and keep it or resell at a higher price.
* Buy a foreclosure property (after doing your
research carefully).
* Buy a house due to be torn down and move it
to a new lot.
* Buy a partial interest in a piece of real estate,
such as part of a tenants-in-common partnership.
* Buy a leftover house in a new-home development.
Q:
Can
you negotiate the price on new homes?
A:
It can be difficult to negotiate the sales price
with a developer because they may claim their
prices are based on fixed construction costs.
But it doesn't hurt to try.
Experts
say builders are more likely to be flexible
on price at the very beginning and the very
end of a development project. Early on, most
developers want to move people in quickly so
the project picks up momentum. Later, developers
may be more inclined to accept lower offers
when only a few units remain.
If
negotiating the price doesn't work, buyers commonly
negotiate for better amenities (upgrade carpet,
light fixtures, etc.) or lot location. Experts
say a developer will rarely pass up a deal over
a couple hundred dollars' worth of carpeting,
for example.
Q:
Who
gets the furnishings when a home is sold?
A:
It depends. Fixtures, any kind of personal property
that is permanently attached to a house (such
as drapery rods, built-in bookcases, tacked-down
carpeting or a furnace), automatically stay with
the house unless specified otherwise in the sales
contract. But you can consider anything that is
not nailed down negotiable. This most often involves
appliances that are not built in (washer, dryer,
refrigerator, for example), although some sellers
will be interested in negotiating for other items,
such as a piano.
Q:
What
do you think of get-rich-quick real estate schemes?
A:
Most real estate experts say there is no such
thing as getting rich quick in real estate. But
there's no end of get-rich-quick programs presented
to the public as alternative methods of buying
real estate. Some are reputable while others depend
on your financial circumstances to work. A handful
are simply scams.
Many
get-rich-on-real-estate programs offer advice
on how to buy government foreclosure properties
and participate in other government programs.
Most of this information can be obtained by
calling the government offices involved directly.
Anyone
interested in real estate investments would
be wise to explore a variety of sources. Most
investors view real estate as a long-term investment.
Deals that sound too good to be true often are.
Q:
What
is the best time to buy?
A:
Because
many buyers prefer to move in the spring or summer,
the market starts to heat up as early as February.
Families with children are eager to buy so they
can move during summer vacation, before the new
school year begins.
The
market slows down in late summer before picking
up again briefly in the fall. November and December
have traditionally been slow months, although
some astute buyers look for bargains during
this period.
Q:
What
are some tips on negotiation?
A:
The more you know about a seller's motivation,
the stronger a negotiating position you are in.
For example, a seller who must move quickly due
to a job transfer may be amenable to a lower price
with a speedy escrow. Other so-called "motivated
sellers" include people going through a divorce
or who have already purchased another home.
Remember,
that the listing price is what the seller would
like to receive but is not necessarily what
they will settle for. Before making an offer,
check the recent sales prices of comparable
homes in the neighborhood to see how the seller's
asking price stacks up.
Some
experts discourage making deliberate low-ball
offers. While such an offer can be presented,
it can also sour the sale and discourage the
seller from negotiating at all.
Q:
What
repairs should the seller make?
A:
If you want to get top dollar for your property,
you probably need to make all minor repairs
and selected major repairs before going on the
market. Nearly all purchase contracts include
an inspection clause, a buyer contingency that
allows a buyer to back out if numerous defects
are found or negotiate their repair.
The trick is not to overspend on pre-sale repairs,
especially if there are few houses on the market
but many buyers willing to buy at almost any
price. On the other hand, making such repairs
may be the only way to sell your house in a
down market.
Q:
What
is the difference between list price, sales price
and appraised value?
A:
The list price is a seller's advertised price,
a figure that usually is only a rough estimate
of what the seller wants to get. Sellers can price
high, low or close to what they hope to get. To
judge whether the list price is a fair one, be
sure to consult comparable sales prices in the
area.
The
sales price is the amount of money you as a
buyer would pay for a property.
The
appraisal value is a certified appraiser's estimate
of the worth of a property, and is based on
comparable sales, the condition of the property
and numerous other factors.
Q:
What
is the first step to buying a home?
A:
Finding out what you can afford is one of the
first steps, which can be done by pre-qualifying
for a home loan. This step will help you narrow
your search for both a neighborhood and particular
houses. A pre-qualification is a simple calculation
that considers several factors, but primarily
your income. There are no guarantees with a pre-qualificaiton,
but it will be expected of you when you make an
offer on a home.
Q:
Should
I include an inspection contingency in my offer?
A:
An "inspection contingency" protects
you as a buyer in a purchase offer by allowing
you to cancel closing on the deal if an inspector
finds problems with the property.
As
soon as the seller accepts a written offer,
the document becomes a legally binding contract.
The purchase contract can be written to include
a contingency for any repairs found to be needed
or related items the seller must take care of
before closing. If these are not dealt with,
and you have such a clause in your contract,
you can delay or possibly cancel the closing.
If it's not stated in the contract, you could
face losing your deposit. There also may be
costly legal implications stemming from backing
out of a contract.
You
usually will have the right to choose the inspector
(and be responsible for paying for the inspections.)
In addition to an overall inspection for structural
soundness, you can request a satisfactory pest
control inspection report, roof inspection report
or contingency for no potential environmental
hazards such as asbestos or radon gas.
Contingency
clauses should satisfy the concerns of both
the buyer and seller. Buyers also can protect
themselves by inserting additional necessary
contingencies. Indicate which items like curtains
and appliances are to remain with the house.
Then stipulate you have the right to personally
inspect the home 24 hours before closing to
make sure all is in order.
Q:
Do
I need an attorney when I buy a house?
A:
In
some states, you do need an attorney to complete
a real estate transaction, but in others (like
Florida) you do not. Most home buyers are capable
of handling routine real estate purchase contracts
as long as they make certain they read the fine
print and understand all the terms of the contract.
In particular, you should be clear on the terms
of any contingency clauses that will allow them
to back out of the contract.
If you have any questions at all, it may be
advisable to consult an attorney to avoid future
legal hassles. In looking for an attorney, ask
friends for recommendations or ask your HomeJoy
Real Estate agent to recommend several. Call
to inquire about fees and to check on their
experience. In general, more experienced attorneys
will cost more, but real estate fees as a rule
are small relative to the cost of the property
you are buying.
Q:
How
much does my real estate agent need to know?
A:
Real
estate agents would say that the more you tell
them, the better they can negotiate on your
behalf. However, the degree of trust you have
with an agent may depend upon their legal obligation.
Agents working for buyers and/or sellers in
Florida can represent the buyer or seller exclusively,
called single agency, or represent the sale
of the home for both the buyer and seller in
a Transaction Broker situation (dual agency
is illegal in Florida.) A Transaction Broker
situation exists if two agents working for the
same broker represent the buyer and seller in
a transaction and a conflict of interest is
avoided since neither agent shall disclose to
the buyer that the seller will accept less than
the list price, or disclose to the seller that
the buyer will pay more than the offer price,
without express written permission. Or a single
agent can show a listing from its own agency
by becoming a Transaction Broker. A Buyers Broker
is an agent who can never become a Transaction
Broker and thus can never show its own agency's
listings.
Florida requires agents to disclose all possible
agency relationships before they enter into
a residential real estate transaction since
some brokerages are Transaction Brokers only
or are Buyers Brokers only.
Q:
Is
there a secret to good negotiating?
A:
There
are several cardinal rules to negotiating effectively.
One is do your homework, and learn as much about
the seller or the buyer as you can. Another is
to play your cards close to your vest and not
reveal too much information to the other party
or their agent. Don't let yourself get rushed
into any decision, no matter how tempting it may
be. Finally, if you have doubts about your negotiating
skill, hire someone to help.
Copyright 2006 Inman News
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