We rely heavily on Dave Ramsey's Endorsed Local Providers for information relivant to our clients needs. Here are some great tips from the ONLY preferred lender from the Dave Ramsey Show - Churchhill Mortgage.
Negotiating the price for your new home doesn't have to be a stressful experience. Anyone can be a successful negotiator if a few simple things are kept in mind.
First, a Pre-Approved Buyer has basically the same power as a “Cash Buyer.”
Second, an informed buyer is a confident one.
Negotiations may be like snowflakes, no two are the same, but one thing that's helpful in every negotiation is information. Below is a list of questions that will allow you to become well informed heading into negotiations.
1. How long has the property been on the market?
Usually, the longer the property has been on the market, the more likely the seller will be to negotiate.
2. Has the price been reduced during the listing period?
If there have been any reductions, especially large ones, in relation to the overall price, then the seller will again be more apt to negotiate. You can also ask what the
Sellers originally paid when they bought the home.
3. Have there been any other offers on the property?
Its good to know what offers are being considered and what offers have been turned down and why.
4. Why is the seller selling?
It is always good to know a person's motivation when negotiating. This will help you in choosing what offer to make. Sometimes, talking to neighbors will
uncover motivations that were unknown to your Realtor.
5. What all are you buying?
Is the seller leaving anything else behind? Furniture or equipment, washer, dryer, etc. This should all be taken into consideration when making
6. What is the price range of properties that have been sold in the area?
This will give you a good idea of what the market is like in the area.
7. How long do properties stay on the market in the area? This average will let you know how heavy the competition is you may be facing.
8. What is the list to sale price ratio in this area? This tells you what homes were originally listed for vs. what they actually sold for. Knowing this will help you determine
how little the seller may be willing to bend.
9. What is the average price per square foot of recent sales in the area? Now you will know how the house stacks up against others in the area, without worrying about
size. It puts all houses on the same level.
10. What other factors may affect the property value of the house or neighborhood?
Crime, flood planes, natural disasters, termites, in other words find out the history of the house and area.
The only final information you should get now is a comparative market analysis (CMA). You can request your Realtor to write one up for any of the houses you wish to make an offer on. A CMA is what a seller uses to set the asking price. It may show you that the price they are asking is a bargain or extremely inflated.
Now that you are armed with knowledge, negotiations will be much easier. Now you know what a good price for the house actually is.
When you get into the actual negotiations, don't be in a hurry. Remember to be relaxed and patient. You have all the information you need in front of you, don't hesitate to take time to look over it again. As the buyer, the ball is in your court. You can always raise your offer if you need to, but you can't easily lower it.
Remain aloof and don't act as if you've fallen in love with the house, make them convince you that the house is the one for you. Don't let them rush you into a buy. If they say there is another buyer seriously interested, don't become over anxious, they may be bluffing.
Another ploy often used in negotiations is the 'good cop/bad cop' strategy. This takes place when one person acts as the hard liner who won't budge only to be convinced to come down a bit by the 'good cop.' The price they move down to, no matter how much the 'bad cop' complains, still may not be a reasonable one.
Don't get into a bidding war. If you are told that you are in competition with another buyer, let them make the first move, and avoid continuous bidding. This will just drive the price out of your range. Drop out of the bidding and see what the sellers' reaction is.
The key to all negotiations is to know your limits. If you've set a cap on spending, stick to it, don't let someone talk you into something you can't afford or aren't willing to pay.
I hope this perspective has been helpful in your home purchasing decision.
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Home Loan Specialist
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