Vol. 4, No. 2, February 2008
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The Price is Right...
But is it the right time to buy a home?
House Hunting
Let’s start with the fun part: looking for a house. While you might fall in love with one place, it’s essential to shop around, because it gives you leverage with sellers.
Take notes (location, neighborhood, square footage, lot size and amenities, and, oh yes—price). Look at “comps,” or comparable homes in the area, to discover whether a home is reasonably priced for the neighborhood; if it’s higher, what amenities set it apart? If it’s lower, find out why. Sometimes there’s something wrong with the house; other times the owner will price low to sell quickly.
Price Points
Information is ammunition. Study the pros and cons, and find out if you have a motivated buyer. If you really like a house, make a reasonable first offer. It’s rare that someone would accept an offer more than 20 percent below asking price. If you low-ball, the seller might not counter-offer, which is your goal. If you have to re-bid without a counter, your leverage has significantly decreased.
Add two important contingencies: the house must pass inspection by an independent professional inspector, and (unless you’re paying cash) you get adequate financing from your lender.
If the inspector finds something seriously wrong and the owner won’t fix it, submit a new counter-offer and discuss the situation with your lender. Haggle if you must. In some instances, your lender may not approve a mortgage on a home with serious deficiencies.
Even if your offer is accepted and you’re headed toward closing, you’re not out of the woods. No deal is final until your lender actually commits to your loan. Meantime, someone else can come in with an offer to trump yours. You can then re-bid up, but don’t be afraid to walk. There’s always another house out there.
Negotiating Tactics for Homebuyers
• Don’t accept the first offer. The owner may worry he’s priced it too low and re-price higher.
• Don’t be calm. Flinch when you first hear the price. Appear shocked and dismayed. Staying calm can work against you when you want the best price.
• Put the squeeze on. Tell the seller, “You’re going to have to do better than that,” then shut up. A better price could be forthcoming.
• Never offer to split the difference in any negotiation. Let the seller do it, then split the difference after splitting the difference. That way, you win.
• You really want the house? Save one small concession for the end to give everyone the feeling they won.
