After months of saving money for a down payment, applying for a loan, looking for realtors, and shopping for houses, when it comes time to negotiate a price, it can feel like the process will never end. For many, making an offer on a house and having to negotiate the price and details of the offer can be one of the most challenging parts of the process.
When you work with Iron Gate Real Estate, you can be confident that you’re working with the best in Columbia. Our realtors have years of experience and knowledge and can assure you that you will be well taken care of from start to finish. We have successfully negotiated countless offers, so we understand the fine details of the process.
If you are looking to buy a house in the Columbia, MO area, here are a few things to consider as you head into the negotiating process.
The negotiating process begins with the homebuyer making an initial offer on the house. Depending on the market in the area, how long the house has been on the market, or if there are other offers on the table, the seller will sometimes make a counter-offer, and this is where it all starts.
It’s best to respond quickly after the seller has made a counter-offer (within 24 hours), in order to avoid losing the house completely. Negotiating a sale price often isn’t a very long process and any lags in responding could cause the seller to walk away.
Finding the Sweet Spot
It’s not any surprise that homebuyers want to pay as low a price as possible, and that home sellers want to get the highest price possible — this is what negotiating is all about. In order to find that sweet spot that is somewhere in the middle, your realtor will look at comparable homes in the area that have sold recently. They will look at the features of the home, square footage, yard space, and more. This will make sure that you aren’t overpaying, but still paying enough to satisfy the seller.
If you and your realtor decide that the sellers counter-offer is still too high, you can decide to make another counter-offer; however, be careful to not get too eager and offer a price that you aren’t comfortable with. When new homebuyers really love a house, it’s easy for them to throw their budget out the window, but remember that you do still want to have a life outside of paying your mortgage.
Increase the Earnest Money Deposit (EMD)
In order to show the seller that you are serious about buying the house, you can offer an EMD that is 1% to 3% of the sale price of the home. An EMD, in addition to raising your offer, may be enough to convince the seller that you are the right buyer for their house.
Sellers are often eager to close the sale as quickly as possible so they don’t have to continue paying property taxes, insurance, etc. as well as waiting for escrow to close. To make your offer even more appealing, offer to close in 30 days instead of 45 or 60. The potential downside to this is if you’re unable to get what you need done in time. In those 30 days, you’ll need to get a home inspection, home appraisal, and complete any final financing steps. These steps are often in the hands of banks and other parties, so you could be cutting it close.
When writing up a contract, there are several contingencies that can be included to protect yourself and give yourself some leeway going forward. Here are a few of the most common contingencies:
- Inspection: A traditional home inspection includes a close look at the home’s foundation, roof, electrical system, heating, cooling, and plumbing. However, you can also include additional inspections that fall in this inspection contingency, such as mold, asbestos, or wood damage. When the inspection is complete, you will receive reports and if there are major problems, you can also negotiate what will be fixed, and if and who will pay for them. If you and the seller can’t come to an agreement, you can walk away from the sale.
- Financing: Homeowners will need to be preapproved for a loan before they can make an offer on a home; however, they won’t actually go through the process of receiving the loan until after the inspections are complete, a title search is done, and an underwriting stage is complete (an in-depth look at your finances). If you can’t get financing for the home, this contingency allows you to look for other options or to walk away.
- Appraisal: An appraisal is completed to determine the fair market value of the home. Your lender can only loan you up to the amount of the market value of the home. If the appraisal of the home comes back less than the sale price of the home, there will be a difference that you are responsible for. For example, you agree to pay $150,000 for a home, the appraisal comes back at $135,000, so you would be responsible for the $15,000 difference. This contingency allows you to renegotiate the sale price or walk away.
- Title: The home’s title is a record of who owned the house in the past and if there are any liens or judgments on the property. When things go smoothly, the title company resolves any issues before transferring the title to you. However, when any issues cannot be resolved by closing, you have the ability to walk away.
- Home Sale: This is especially important for buyers who currently live in a home that also needs to be sold before they can move into their new home. This contingency provides a certain amount of time in order for the buyer to complete the sale of their current house.
Appliances & Fixtures
Surprisingly, some things can be negotiated into the contract if both parties agree on the terms. Appliances are often not included in the sale price, unless they are permanent fixtures of the home, such as a microwave built into the cabinets. Other permanent fixtures, such as kitchen and bathroom hardware should stay with the house. When it comes to personal property, however, such as a large mirror in the bathroom or a chandelier in the dining room, even though these are attached to the house, they will often be taken with the seller when they move out. These details should be mentioned in the contract, whether you’re a buyer who wants to include the appliances in the sale price or if the seller wants to make sure they get to take their Tiffany chandelier with them.
This is one of the biggest negotiations that could take place other than the price. If issues are found during the inspection, such as a leak in the roof, a furnace that needs to be replaced, cracks in the foundation, or even things like popcorn ceilings, details about what to do can be included in the contract. What typically happens is that a lower sale price is renegotiated and the buyer manages the repairs, or the seller takes on the responsibility before the sale is completed.
When you are ready to make an offer on a home and are in the middle of negotiating, your realtor will go into detail about all of the options and possibilities available to you. When you work with the team at Iron Gate Real Estate, you can be confident that you’re being given all of the information and resources necessary to make an informed decision.
The realtors at Iron Gate Real Estate help clients buy and sell homes throughout the Columbia area. If you need professional, reliable, and knowledgeable agents, contact us today!