Here’s what you will need to consider. First and foremost you will need recent, accurate comparables. Make sure this information is clear to you and that you understand how much weight to give each element.
RE: the home you are considering purchasing:
- Is the asking price in line with prices of similar homes in the area?
- What is the condition of the home – will you need to spend a substantial amount of time or money-making it suit your needs?
- How long has the home been on the market? How many price changes in that time? Was it on the market previously and not sold? Why?
- What will be your mortgage amount and monthly payments?
- How much do you really want this particular home? Do you have other options or is this the one?
RE: the comparable home sales you will use
- You must consider closing date and the terms of each sale. Was it an arm’s-length transaction – meaning the parties to the transaction (sometimes including agents) were not relatives, or there was no reason that the price may have been artificially discounted or inflated. Was this a distressed sale, short sale or foreclosure? Closing date should be reasonably close to your purchase date.
- Was it a cash sale? Financed by a lender? Carry-Back (owner financed)?
- Was the home sold above appraisal price? The buyers may have put additional money down to make this happen.
- What was the condition of each of the comparables? Were there valuable upgrades? A premium lot?
- What is the comparable property’s distance from the home you are considering? If not the same subdivision, is there value difference between the two neighborhoods?
Common points of negotiation
The buyer and seller may negotiate many of the associated costs of the transaction. Some common items are: price, financing, closing costs, repairs, appliances and fixtures, landscaping, painting and occupancy time frame. All of these things could affect the price that you offer but remember, some items are considered personal property and can not be included in the price of the home for mortgage purposes. And the final say on value will be the appraisal.
Counter Offers
Offers are occasionally rejected outright, but it is common for a seller to counter an offer with terms acceptable to them. Don’t let this intimidate you. Now is when the negotiating really begins.
- Maybe you offer more money, but ask the home seller to cover some or all of your closing costs or to make repairs that wouldn’t normally be expected.
- Perhaps you grant the seller more time to move in exchange for a price break or per-diem payment, if you know extra time is what they need.
- Just remember – don’t get so caught up in negotiations that you lose sight of what is in your best interest.
