“Buyer beware” is an expression most of us are familiar with and this adage applies to any would-be home purchaser in today’s “seller’s” market. As a buyer during the current environment of high-demand and low-inventory, it’s important to consider the negotiating options available to you when house-hunting. Here are eight tips to keep in mind when making an offer.
Know thyself. Before you venture into what will easily be the largest financial obligation and purchase of your life, it’s vital to understand your personal economics. You must establish a realistic budget. This will help manage expectations when looking for your home and will set boundaries for any offers you make. Obtain a prequalification, or even better, a pre-approval, from a mortgage lender to distinguish yourself from rival offers. Both services are effective, non-obligatory and free. If adjustments need to be made to your debt structure, credit, and/or savings, this is the ideal time to entertain it.
Partner with a real estate professional. Interview agents in the area where you want to buy a home. Be sure to communicate your hot button items. An experienced realtor representing you in these matters helps you properly “navigate the waters” and should keep the process objective and free of emotion. Most often, the seller will have employed an agent, so having one on your side of the negotiating table is essential.
Conduct research. With or without a realtor, check public records and comparable sale prices for the homes that interest you. Fortunately, much of this data is accessible online. Use this information to determine what you want to purchase, where and why. Doing research in advance can help you to either confidently pursue or back away from certain listings.
Bring your best offer first. If you are satisfied with your finances, have confidence in your representation and are familiar with the area of interest, then it may finally be time to make an offer. In this highly competitive environment, bidding wars are not unusual. However, it’s not all about price. Increasing purchase prices with escalation clauses may be common, but adding, removing, or modifying contingencies can be a creative way to separate yourself from the pack. For instance, you can lobby the seller to accept a larger initial earnest money deposit than customary or entice the seller with a quick closing date or just the opposite, offer a flexible closing date in the event they are also in the market to purchase. While most lenders don’t require home inspections (termite, radon, water, septic, etc.), they are not to be dismissed as they can allow for leveraging and reveal a great deal about the property. Discovering that there is mold, a foundation crack or roof leak often gives the buyer the ability to negotiate terms since these items would have to be remedied eventually. Consider repairs, improvements or other upgrades needed or desired on the subject home. While inspections may not be amenable to the seller, you do not want to compromise your own health or safety. Finally, it is almost imperative to maintain a mortgage contingency in your contract, if not accompanied by an appraisal contingency, to further protect your interests during the purchase process. As an alternative to inspections, you may consider purchasing a home warranty which is affordable and delivers extensive coverage.
Keep offers tight. You don’t have to make a full price offer, but this market dictates that it be close to asking price. In this environment, there are still more offers than available property. A low offer can often result in offending the seller. In today’s market, many purchases have been negotiated over the list price. Examine your finances and determine how far you are willing to stretch your dollars.
Consider payment over interest rate. We naturally gravitate to interest rates and wanting the lowest one available. Interest rates, though under increasing pressure, are still historically low. Instead of over emphasizing rates, scrutinize what the actual monthly obligation would be and you may find the payment more affordable than anticipated.
Know when to walk away. Be neutral and level-headed. Certain sellers can be unreasonable, but their overpriced listings will likely sit on the market longer. At present, the average home is on the market for 40 days, which is twice as long as it was just a few months ago. Set a budget for your home purchase and stick to it. Try to avoid getting emotional and move on to the next property if necessary.
Be personal and stay vigilant. Make inquiries as to the seller’s motivation. A written letter expressing your interest in the home because you have kids who love the house and can walk to the local park or school can be heart-warming, but don’t overdo it and risk the seller sensing your desperation. Houses are sitting just a bit longer on the market. This trend may continue as interest rates rise and some buyers exit the roller coaster so being patient may pay dividends.
A home purchase in any market can be both exciting and stressful. It’s easy to become overwhelmed. Homeownership can also be incredibly rewarding and a sound financial investment. It is helpful to have an experienced Mortgage Loan Officer provide guidance and a roadmap through every aspect of the process. The team at Univest has a solid track record, are based right in the communities where you will be purchasing a home and proven customer service. Reach out to one of the Univest Mortgage Loan Officers today to have a conversation. We look forward to working with you during the entire home buying process and, ultimately, sitting with you at the settlement table!
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