Rising mortgage rates and home prices have reduced affordability to its lowest point since 1989 according to the National Association of Realtors (NAR). Home prices have increased significantly but have begun to fall. Prices were up 18 percent year on year in June, according to the Case-Schiller index, however that was down from 19.9 percent in May. As per Lawrence Yun, NAR’s chief economist, the housing market slumps due to declining sales and construction. All these reasons, including higher mortgage rates, make home-buying even more challenging— but not impossible. There are still ways for a home buyer to get under contract. Understanding the concept of negotiation, what is reasonable under current market conditions, and how to approach a seller with composure can be critical to buying a home at a price you are satisfied with. Here are 6 helpful negotiating tips for buyers.
1. Work with an Expert
Find someone with whom you can work comfortably and who is well-versed in your local market. Having a professional expert on your side can be beneficial throughout the entire home-buying process: your realtor will know how many homes in the area have sold, understand the legal paperwork you’ll need to deal with, and act as a mediator between you and the property seller.
2. Financing Terms are an Essential Component of an Offer
The offer should include a summary of the financing terms and indicate whether the offer is contingent on financing. It’s a good idea to get pre-approved for a mortgage so you know what kind of interest rate you’ll need ahead of time. Having your down payment prepared and your finances in order will put you in a better position when it comes time to negotiate. Prepare for a counter offer, consider your budget, and stick to it!
3. Set the Timeline to Close
Unless you are buying a home with cash, the buyer’s lender determines how long it takes to close. As a result, getting your loan pre-approved prior to actually getting too far into the process is critical. When the clock starts ticking (after a signed contract), you’ll have to deal with earnest money, a home inspection, an appraisal, locating homeowner’s insurance, and a slew of other issues.
4. Ask about all the Inclusions/Exclusions
When negotiating, inclusions are frequently one of the things that are overlooked. The fact that the MLS asserts they are excluded or not included does not negate them from being included. Many homeowners, especially those who are downsizing, may not want to deal with the hassle of moving large furniture or appliances. However, it’s a fantastic opportunity for first-time home buyers to have interiors already in place. This saves the seller from putting on a yard sale and also serves as a useful negotiating tool. Keep a list of the things in the home that resonate with you and could be used as bartering tools when previewing homes. The bottom line is, don’t be afraid to ask.
5. Contingencies are an Important Part of an Agreement
A contract’s contingencies are primarily a list of requirements or actions that must be fulfilled before the contract becomes binding. These conditions can be broad in scope and are imposed to protect both the buyer and the seller. Whatever is included in the contract’s contingency section should be detailed very clearly, leaving no room for ambiguity.
6. Home Inspection
This is frequently the step that allows for additional negotiation and, potentially, a price correction on the house. It should be emphasized enough how crucial a home inspection is during negotiations. It not only saves you money in the long run, but it can also affect the value of your home. It is critical to consider the entire property rather than focusing on minor details that can be easily fixed and improved later. Keep track of your complaints, but don’t let something minor derail your negotiations.
The Bottom Line
For prospective buyers these days, the concept of affordable housing feels like a huge challenge, making the negotiation process stressful and time-consuming. Regardless, don’t lose sight of your goal, even if the road ahead is a little steep. Establish a level head and remain optimistic about the process’s outcome. Your local expert will assist you in completing the process. And when all the work is finished, congratulations! You are now a homeowner.
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