When buying a home, you are expected to negotiate throughout the process, from negotiating with your agent for a home buyer rebate to negotiating closing costs after an inspection.
Although it is currently a seller’s market, which means that sellers have the advantage, buyers can still negotiate to get a good deal on a home.
Related: Realtor Fees: Your Questions, Answered
1. House price
One of the most obvious things a buyer can negotiate is a home’s listing price or asking price. A real estate agent can provide an analysis of how long the home has been sitting on the market and the final sale price of comparable homes in the area. Using this analysis (or one they create on their own), the buyer can decide exactly how much to offer the seller.
It’s important to note that we are currently in a seller’s market, meaning there is high demand from buyers but low housing inventory, giving sellers the upper hand. Therefore, if someone comes in at below asking price, they might have a hard time closing the deal depending on how popular the property is.
2. Mortgage rate
One of the most important things to understand when taking out a mortgage or home loan is how much interest you will pay over its lifespan. Since the pandemic, mortgage rates have reached historic lows, motivating many people to jump into the real estate market. The current interest on a 30-year fixed mortgage is around 3%, and around 2.4% for a 15-year fixed-rate mortgage.
While rates are already competitive, what buyers don’t always realize is that they can save even more money by asking their bank or lender to match a competitor’s lower rate. Even shaving off a fraction of a percentage point on a mortgage rate can save borrowers thousands of dollars in the long run.
3. Mortgage points
A common negotiation tactic is to ask the seller to put money towards the buyer’s “mortgage points” at closing. In exchange for a lower interest rate, lenders allow borrowers to pay “mortgage points” at closing, where one point is equivalent to one percent of the mortgage. Overall, paying these points can result in a lower monthly mortgage payment.
Usually, seller-paid points consist of a one-time, lump sum amount paid by the seller to the buyer’s lender.
4. Closing costs
Sellers are expected to pay a myriad of fees at closing which can range between 8% to 10% of the final sale price. However, buyers are also expected to bring cash at closing as well for things like title insurance, loan origination fees and deed recording services. The buyer can request that the seller pays all or a portion of these fees for them (though, the seller doesn’t have to agree). Conversely, to make their offer more attractive in a competitive market, buyers may cover some of the seller’s closing costs.
If a buyer sees furniture that they like in a home, they may be able to keep it. While it is not an automatic given that furniture will be included in a home sale, buyers can negotiate to keep some or all of a property’s decor. If a seller was planning on donating or selling the items anyway, they may be willing to part with them for little or no charge.
It is common for large appliances to be included in the final sale of a home, but it’s always good to double check with the seller. Buyers might assume that the washer/dryer machine, dishwasher, refrigerator and oven all come with the house, but not all sellers are willing to part with their stainless steel. Clarifying these details ahead of time can avoid confusion at closing.
7. Light fixtures
Light fixtures and chandeliers can become quite the point of contention during the home sale process. While some sellers may be willing to leave them behind, others may be partial to a particularly fashionable or heirloom chandelier. If a buyer wants something included in the sale, they should make sure to get it in writing.
Buyers include contingencies in their offer to protect themselves during the purchase process. The most common types of contingencies are:
- Financing: If purchasing a home is contingent upon a buyer receiving lending, then this should be included in the offer.
- Appraisal: Knowing the home’s fair market value before finalizing the deal.
- Inspection: Understanding all of the damages in a home before agreeing to move in.
While certain contingencies in an offer can help a buyer protect their best interests, including too many can scare away or irritate the seller.
9. Home buyer rebates
While the seller is expected to pay a buyer’s agent fees, buyers can still negotiate with their agent for additional discounts, like a home buyer rebate.
Home buyer rebates are given when a realtor refunds a portion of their commission back to the buyer, and are usually capped at 1% of the final sale price.
10. Repairs needed after inspection
The home inspection is one of the most important parts of the buying process. If the results of a home inspection reveal more damage than anticipated, the buyer could use these flaws as leverage during negotiations. Depending on the severity of the repairs needed, a buyer can ask the seller to put money towards repairs, or make the repairs before they move in.
As an example, if an inspection reveals damage to the roof, even the simplest of roof replacements can cost around $4,000.
11. Home warranty premium
Home warranty plans cover the cost of repairs for a home’s appliances, such as plumbing, hot water heater and HVAC system. Buyers can negotiate a home warranty plan into their final offer with the seller if they think it’s necessary.
Sometimes, a buyer thinks a home is absolutely perfect except for one or two features. Whether it’s a new kitchen, a redone bathroom or hedges to the backyard, buyers can ask the seller to make renovations before they move in.
13. Occupancy date
A buyer can negotiate with the seller on move-in date if they need more or less time after closing. However, it is uncommon for a buyer to move in before closing as it can be risky for the seller if the deal falls through.
Sometimes, it’s the seller that needs to stay in a home longer. If a seller needs to move-out after closing, then the buyer can negotiate a “rent back” or “leaseback” agreement where the seller essentially would become a tenant. Sellers typically take this route if they need more time to find a new place to live, and the parties can agree on rent and deposit amount.
15. Professional cleaning services
Before moving into a new home, many people want it professionally cleaned. Especially during these pandemic times, asking for the seller to pay for or put money towards professional cleaning services is not uncommon.
A buyer must pay transfer taxes or prorated property taxes after a house officially changes hands. Typically, a seller will cover these taxes. If there are multiple offers on a home, a buyer could make their offer more attractive by paying these taxes themselves.
17. Earnest money deposit
Earnest money deposits vary significantly. They can range anywhere from $500 to $5,000, depending on the market. A buyer can up their earnest money deposit to make their offer stand out and show that they’re serious. At the end of the day, it all goes towards the final sale price.
18. Attorney fees
Depending on the complexity of a transaction, a buyer may use an attorney to finalize the contract. The buyer can ask the seller to cover these fees in order to ensure they are getting the best deal possible.
19. Title insurance
Lenders will require borrowers to provide them with title insurance to protect themselves in case any dispute arises over the ownership of the property. It is also advisable to purchase owner’s title insurance, which protects the homeowner.
During negotiations, buyers can ask the seller to cover the cost of the lender’s and/or the owner’s title insurance, which can add up to around 0.5% of the final sale price.
20. Cars, boats, & personal belongings
Buyers can truly negotiate anything into the final sale of a home. If a seller has to pay a large fee to move a car or a boat to their new residence, they may be willing to leave it behind for the right price. Other personal belongings like televisions, art and more can also be negotiated into a deal.
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