7 Tips to Buy and Negotiate like a PRO…be a Seller’s Worst Nightmare!!
If you plan on purchasing a 1st home, or any home for that matter, there are things you NEED to know…
I’m sure you’ve heard the phrase “Knowledge is power” before, and there is some truth to it, but Knowledge applied is the only way you really benefit.
I want to share some helpful tips and techniques I use for my Buyers in everyday transactions and negotiations to help you get the most for your money and cover your “assets” in the process.
Imagine for a moment… you are about to buy your 1st home. You have taken the time to learn more about your financial situation and comfort level in your housing budget…
…you know your “goals” for purchasing a home and a great understanding of what kind of home you need and what you will pay for it…
…you know how to “play it cool” around the Seller and their Realtor, and are armed with negotiating tactics that keep you in control of the negotiations…
…you have a team on your side. A team of professionals that are looking after you, and every detail of the transaction, to keep things going smooth, and help you make better decisions than would make alone…
…you find the home…negotiate your price…do your due diligence..and close the deal. Now you are sitting back relaxing…enjoying the home of your dreams with family and friends….
That’s what I want you to enjoy…that’s why I wrote this for you!!!
Sounds Great right?
I’m sharing 5 Tips and Pitfalls that I think a 1st time Buyer should be aware of among many others. I do have FREE Special Reports on other such topics, but I wanted to start with the “basics”…
1. Work with your Loan officer BEFORE you look at Homes:
This absolutley amazes me, and is so common it is mind boggling! I’ve spoken to MANY 1st time and even 2nd and 3rd time Home buyers that constantly “put the cart before the horse”.
They spend hours of their lives, and the lives of their Realtors, looking at property on the weekends, driving to open houses, scouring the internet for “deals”, and maybe even writing an offer BEFORE they even know if they can, or want to afford the home!!
I almost feel bad for them. They did all this work and then when push comes to shove they find out they have an issue with their credit, or the bank’s standards have become too strict for them, or maybe they really didn’t understand exactly how much the payments would be.
The damage is lost time, effort, and money (gas isn’t cheap), and the fact that now they may be emotionally hurt having their hopes crushed. Not to mention they get a bad name with their Realtor who doesn’t want to waste anymore time and money on them.
The other and maybe more important factor is, if they were to get into negotiations, they may not even know enough about their own financial situation to make an effective offer, and negotiate from a position of strength. If they needed money for closing costs, and never spoke to a loan officer, that would be a VERY important piece of information and they could find themselves in a serious problem, even risk losing their deposit under certain circumstances!
It is a dangerous and fruitless effort to work this way. Be smart. Speak to the Loan Officer, find out the facts, make a decision to look in a price range that you can not only afford, but one that you WANT TO AFFORD.
This is for your own benefit!!
2. Invest the Time and Thought into KNOWING what your GOALS are BEFORE you Start your home Search…
Look, I’m not saying you know EXACTLY what home you will buy in the EXACT area or floorplan. What I mean is I see a lot of 1st time homebuyers who really don’t have the foggiest idea what would “work” for them.
Example: If you know you are not handy, and don’t have any extra cash for repairs and remodeling then I would say a “fixer upper” isn’t for you. Sure you could go into a home like this make some repairs and updates and have anywhere from $25,000-$60,000 (or more) in equity because of your work, but if you can’t do the work or pay for it, then it’s not for you.
Maybe in the above example you would do better with a “move-in ready” home with a good chance for future appreciation. It all depends on you and your GOALS.
Take the time and really analyze what your “needs” are and make sure you separate them from your “wants”. What I mean is, if you have 3 kids then you may “need ” a 3 bedroom home. On the other hand if you like waterfront property because it makes you “feel good”, that would probably be a “want”.
Know the difference. I always tell people to start with the needs, find out if your budget will allow for them, then see which of the wants you may be able to add to them. This works best because you are prioritizing what you need and will make a much more comfortable, level-headed decision.
Another problem is, you will see a lot of self proclaimed “deals” out there today, but one man’s deal is another man’s headache. So you need to know what works for YOU!!! You are the only person(s) who matter in this decision, and that will keep you focused and wasting less time seeing homes that wouldn’t be right for you anyway.
Stay Focused, Know your “Needs”, Know your Budget!!
3. Negotiate like a Pro…
Here’s where you need to pay attention!! If you are working with a Realtor, then hopefully you won’t have to do too much of the talking, but remember YOU are the buyer, and are still the one negotiating via your agent!!… It’s your Money!!
Rule 1: The party in a negotiation who knows more about the other party usually wins….Obviously this isn’t always the case, but more times then not you’ll see that it holds true.
Example: You are walking through a home that you and your spouse just fell in love with. I mean head over heels in love, you almost feel it’s an indecency. The Seller, or worse for you, their Realtor is giving you the grand tour. They see your smiles and glowing, laughing and talking to each other about where the furniture will go, etc. They are observing it all. So you begin to tell them why you MUST have this home, or how it’s the only one you’ve seen that you like and you need to move in the next 30 days, etc. They are taking all of this information in.
Then you later decide to make an offer. You figure that it’s a”Buyer’s Market” and that you can try and “lowball” them. You think the home is actually worth a few thousand more than what they are asking, but remind yourself it’s a “Buyer’s Market” and proceed with the offer.
The Seller, or their Realtor, tell you the offer is unacceptable and they counter with only a few thousand dollar reduction. You try again. They don’t budge. It’s almost as if “they know” you’ll pay a higher price. Strange you think, “I should be able to negotiate a little more than this”. Finally they tell you that this is their final offer and you take it….
What Happened???… I think the lesson is pretty clear here…
KEEP YOUR EMOTIONS AND CIRCUMSTANCES TO YOURSELF!!!
If you were selling your home to that couple the more they talked and the more you saw their joy, you’d be saying to yourself “chi-ching” and the $$ signs would be in your eyes.
Don’t make this rookie mistake…It’s a poker game, and you can’t let them see your “cards”. I kid you not this may be the most beneficial negotiating tip you can use. Not just in real estate in any situation!!
Remember: Play cool while you are around the Seller and ESPECIALLY their Realtor. When you get down the block then you can giggle and laugh and all that other “fuzzy stuff”. Just put a cork in it until then.
4. Know the Current Market Value of the Home you want to purchase BEFORE you make the offer… and use it to negotiate…
Here is where the “rubber meets the road” in the Buying process. You’ve found a home that appears to be everything you want. It’s in your budget, and you are seriously considering making an offer…
What should you offer? How much is the home worth anyway? How long has the home been for sale? What are similar homes in the area selling for? Are homes in the area selling?…
These are just some of the questions, I believe, you need to know to maximize your offer and truly know what you should pay for the home.
If you are working with a Realtor they should help you with this and it should only take 30 minutes or so, depending on the area. If you are going at it alone… good luck!!
If you are Buying without the assistance of a Realtor than you need to have access to this information. The problem is… you don’t. You can find sale prices in the county tax records, but there is no information on the description of the property, condition of the property, condition of the seller, seller concessions that may have inflated the price, time the home was on the market, etc…
You have very little information to go on and that is NOT the way to make an offer.
If you are against using a Realtor for some reason, like, to “buy from the seller and get a better deal” you better know your stuff because not knowing this information will probably cost you more than you can expect to “save” working with the seller directly, and not a professional.
If you are open to using a Realtor, but haven’t found one yet….FIND ONE that you can trust. Look for referrals from others first, but make sure you are comfortable with whomever you choose.
Now you know the prices homes are selling for in the area, how long homes sit on the market, how long this home has been on the market, how much they have reduced their price, how much they paid for the home, what kind of “discount” the homes in the area usually sell for, etc.
Now you can begin to construct an offer and present this information to the seller to give them “facts” about what their home is worth and why you made your offer accordingly. Sounds better than “Mr. Seller, would you take $200,000 for this place?”
Use this tip to keep the $$ in your pocket and make the “Right” decision
5. Make your offer with room to “play with”…
If you know you are only willing to pay a certain amount for a home than by all means leave a little bit of room for play in the negotiations.
Example: If you know the home you like is priced at $350,000 and your top offer will only be $330,000 then DON’T start there!!
I mean, there are strategies and times and places for that technique, but not for most situations. I would start several thousand $$’s less but not so low that the seller is insulted and won’t counter. Not that I really care about how they felt about the offer, but you know what I mean.
Plus you need to know what the home is actually “worth” and that’s where your Realtor will help you. Don’t rely on Appraisal prices as much, since they are not always a true picture of market value these days. The banks use them for loan purposes, but Buyers shouldn’t necessarily rely on them.
Knowing what the home is worth today is KEY, since that will be the highest price the seller can expect from any buyer in most cases and is basically the “ceiling” for what they will receive. KNOW this price, use it to your advantage!!
6. Strategize your Offer with “Sacrificial” Terms…
What this means is when you create an offer ask for things you may not really even need or want, but things that you can “sacrifice” in negotiating.
Example: If you are making an offer on a home where you are concerned mostly about price and a long closing, ask for something in addition like the furniture, closing cost money, lengthy inspection period, pool equipment, etc.
The point is NOT too ask for so much that you sound rediculous, but rather maybe 1 or 2 things that you can trade off later. So when you send the offer with your price and closing date and these other things and the Seller counters, you may be able to work with the Seller on keeping your price, but NOT the furniture or closing cost money, etc.
The whole point is, most sellers have this thing called ego. It’s this funny little thing that always seems to want to make the person who has it, be “right” or “in control”. By giving them something to “win” at (not having to pay your closing costs, give you furniture, etc) they may be more willing to accept the price and closing date you really wanted.
In addition you are also getting what you really wanted. You didn’t really care about what you traded off anyway, so you win all the way around. Not to mention that there may be times you’ll get the price and these extras if the seller is motivated enough!! Then you really win!
Structuring you offer effectively is more of an art than a science. Use your Realtor to guide and help you, but remember it is your negotiation, NOT your Realtors…
7. Leverage OPT (other people’s time) and OPS (other people’s skills)…
This is where you can really enjoy working with a team of professionals who have your interests in mind. I’m sure it’s pretty obvious that if you’ve never purchased a home before, there are things that you should know BEFORE you start the process.
I mean, one mistake or mis-step along the way and you could lose thousands of $$ or even break the law. You also run the risk of overpaying for a home, not negotiating effectively, paying too much for your loan, not finding out enough about a property’s condition, etc., etc.
I’m not saying that to scare you just to make you aware of the process. It can be a rewarding, and wonderfully memorable experience…or it might be a nightmare that can cost you dearly in the end. Working with professionals that understand the process, and care about you and your needs, is worth it’s weight in gold.
Think for a minute about what you do for a living. Let’s say you are a mechanic. You see a young kid stuck on the side of the road near the diner you’re about to eat at, because of a simple engine problem that you could easily fix. You’ve seen it 100 times and know how to handle the problem quickly and professionally. So you notice the kid trying to fix it himself and offer help, but he refuses saying “he can handle it, it should be a snap”.
You say “ok” and head to eat lunch and spend a few hours with your friends. Then afterward as you are leaving, hours later, the kid is still there and whats worse is it appears he has half of the engine dismantled and on the side of the road next to him.
You walk up to him only to see an embarrased, greasy kid that now doesn’t mind a little help. Unfortunately, he’s now done much more damage, and that easy little fix just won’t do the job. Now he needs a tow and several hundred or thousands of dollars of repair.
I’ve said all that to illusatrate how important it is to work with a team of people who can walk through the steps WITH you and guide you as needed to help you get what you want.
You are good at what you do for a living, and they are good at what they do. It’s that simple. Use their knowledge and understanding of the market and your needs to get the most for your money and stay out of trouble.
As a Buyer there is generally very little cost to you for using a Realtor. I know there are some Realtors that charge their buyers several hundred dollars to work with them, and that’s fine, but other Realtors (like myself) dont charge our Buyers a penny!! So you get a professional working on your behalf, and I get the Seller to pay me!! Not too bad of a deal for either of us.
So don’t try to be a pro at someone else’s business and end up in trouble for it later. Especially as a buyer, since there really isn’t much cost involved anyway. There is no excuse.
Take these things to heart and they will keep $$$ in your pocket and peace during the process.
If you ever have any questions, or need assistance in locating a home, or know someone else that does, I’m here to help. You can email or call me anytime and I’ll do my best to serve your needs!!
Sales and Marketing Specialist
P.S. Please leave me your comments on these tips below. If you found them helpful or have suggestions. It will help me help you!!