Negotiations When Buying a Home

A small cat all burred in a jacket.

Buying a home should not send you diving for your security blanket and avoiding the phone.  While negotiations when buying a home can be stressful, especially if you are a first time home buyer, it doesn't have to be that way.  Asking questions, getting answers, and being prepared can help lower the stress level throughout the transaction.  We think negotiations are fun and exciting and trust our optimism helps you feel good too.  At this point, it feels like we have seen it all, and if we do not have an answer, we will track down who does.  We are committed to making your home buying experience a positive one!

Negotiations When Buying a Home:

After you have successfully negotiated a contract you will enter the contingency period of your contract.  This is the time to get all the inspections you want and desire. When you find the home you would like to make an offer on, consider the following suggestions.

  1. Make your offer through your agent.
    It can be tempting to use the listing agent.  There are rumors that they can make sure you beat any other offers that are presented – especially if they have a reduced commission for bringing the buyer to the seller.  Consider the interplay of loyalty and emotions before you go this route.  The listing agent knew the seller before you ever called to make that offer.  When things get tense (and they often do - especially if there are repair negotiations to be done) who is the agent going to be working harder for – you or the seller?  Make sure you hire an experienced Real Estate agent. The experience will help you find solutions agreeable to all parties to the contract.
  2. READ THE CONTRACT!!!!
    If we could yell this, we would.  You are making promises to perform to the seller when you sign your name to the offer contract.  Please read this document before you ever make an offer. If you have a friend or family member that is an attorney, have them explain the terms to you so you are clear on what you are committing to when you sign.  In Tallahassee, we have two main contracts we see most often.  One is the TBR Contract for Sale and Purchase.  This was copyrighted and vetted by the Tallahassee’s Board of Realtors’ attorneys.  The other is the FAR-BAR ‘as-is’ contract copyrighted and vetted by the Florida Association of Realtors' attorneys.  Even with an as-is contract you can still ask for repairs – IF you find something unexpected or undisclosed during inspections.  Do not sign the as-is contract expecting the seller to renegotiate repairs later.  They will feel you have not acted in good faith and the sellers are not obligated to complete ANY repairs.  Most attorneys that we have worked with as customers, prefer the FAR BAR contract; however, some Realtors in Tallahassee refuse to submit offers to sellers when presented on this contract. (Which is against the law, our ethics agreement, and is just plain stupid.)
  3. Include your pre-approval letter with your offer.
    Anything from your lender that indicates your financial strength will appeal to the seller.  Some lenders offer seller guarantees for qualified buyers.  Check with your lender to see what they can offer to help you in a multiple offer situation.  If you have done your homework, you will know your numbers and know what the mortgage, down payment and closing costs will look like before you ever make an offer.
  4. Look at the comparable sales and do not low-ball.
    Usually, buyers know the market better than sellers.  It is buyers that set the market after all, not sellers.  Before making the offer, look at all the active and sold homes that are comparable to the one you are looking at.  Anything in the same subdivision within the last six months is going to be the best bet for finding a comparable property.  Price per square foot is not always a good tool for deciding what to offer.  Look at the houses that sold closely.  Do they match in size, number of bedrooms and bathroom, garages, fireplaces, pools, age of roof and HVAC, etc.?  The more similar the more they can be relied on as indicating the value of the house you are interested in making an offer on.  The caution against low-balling here comes from experience.  Sellers may be angry and not come down as far for someone that low balls their offer.  Finally, also have your agent take a look at any expired or withdrawn listings in the neighborhood. What did not sell also tells a story and gives the buyer more information on what the market has rejected.
  5. Consider the contingencies in the offer contract.
    Some buyers remove financing or inspection contingencies from the contract to entice the seller to choose their offer.  We do not recommend that.  Contingencies are there to protect the buyer in most circumstances.  Waiving those contingencies should be carefully considered before being put in writing. The one most waived in the financing contingency.  If you trust your lender to close on the loan based on what you have provided them so far, then waiving the financing contingency makes more sense.  You can also ask your lender to shorten the amount of time they need to close on a home loan. Most mortgages can close in 42 days or less.
  6. Be ready to negotiate in a multiple offer situation.
    Many sellers have several offers to choose from and many times, those offers are at or above list price.  A search of the recent sales will show you what percentage of list price sellers are receiving in the area.  If the sellers are routinely receiving list price or higher, buyers will not likely win the bid with a less than list price offer. Also, if you do not need the seller to pay your closing costs, keep your offer as clean as possible. Each house, buyer, seller, and neighborhood is different, and your negotiating strategy should be decided before you get to this point.  Your agent should be able to provide you with information to guide your decision making, like whether most sellers are providing closing costs or repair concessions.
  7. Do not squabble with the seller before you are under contract.
    It is not uncommon in the crazy seller’s market we find ourselves in for sellers to price high considering the condition of their property.  If there are small questions hanging over the home you have chosen, now is not the time to squabble with the seller over the condition. If there are big things to be done and signs of neglected maintenance, and the seller has refused to address them or price the home with the repair in mind, carefully consider making that offer.  No matter what the issues (or nonappearance of issues) once you are under contract (and not before) get an inspection and then decide if whatever is found is a deal breaker. In this seller’s market, if you want the house, put it under contract quickly.
  8. If at first you do not succeed, try, try again.
    Try not to be too disappointed if you lose the first couple homes you make an offer on.  If there are any terms or conditions in the contract that you feel tempted to waive, please contact an attorney.  If you do not understand any of the promises you are making to the seller in that contract, please contact an attorney.  Your real estate agent is not allowed to interpret contract clauses for you.  Often there is an attorney available in the title agent’s office that will be able to answer your real estate questions.
  9. Inspections can change everything.
    Repairs can be negotiated even with AS-IS contracts. If you have an inspection and it reveals previously undisclosed damage or deferred maintenance that will require a significant amount to correct, then buyers can and should share this information with the seller.  While the seller is rarely required to perform any maintenance or repairs, if they were unaware of the problem, they will likely want to negotiate it.  Even if the seller refuses to complete any repairs, they may be willing to provide a concession to cover the cost of the repairs.  Some repairs may be required for homeowner’s insurance and therefore required by the lender before closing.  Even if required by the lender and the seller will not complete the repair, some lenders will allow a repair holdback at closing.  This is especially common with roofs in Tallahassee. Some homeowners’ insurance want at least 7 years left on a roof.  They will send their own inspectors to check.  In the case of a repair holdback, the title agent will hold the money for the roof from the seller’s proceeds.  Once the permit is closed and the buyer is satisfied, the contractor is paid by the title agent.
  10. Get all agreements in writing.
    We once had a buyer we were working with make an offer on a home in the northeast side of Tallahassee.  In the sellers’ disclosures, seller had written that she was replacing the windows in the living room.  The house sat on the market for a while, and the seller changed her mind about the windows and instead opted to remove the bright green plush flooring for about the same price as the new windows.  When the buyer made an offer, she signed the sellers’ disclosures that stated the seller would replace the windows.  Since the replacement of the windows was not on the offer contract, the seller had forgotten what she put and was blindsided by the invoice the buyer sent for her to pay for the new windows they picked out.  If your offer is contingent on the sellers making the repair or update, put it in the offer.  Sellers should be very careful about making promises for any repairs that have not been negotiated with contractors yet.  Once under contract, any receipts for repairs are shared and all repairs must be performed by appropriately licensed contractors.
  11. Find out why the seller is selling. Find out what the seller wants (besides money).
    If the seller is downsizing but staying local, giving them more time to move might help win you the contract.  If sellers do not have a place to land next, offering a lease-back can sweeten the offer, or an extended closing date.  Sometimes savvy listing agents will not provide this information when requested. Most agents are looking for a win-win and can give you some clues on what the seller wants to see.
  12. The answer is always no if you do not ask.
    Keeping in mind the caution not to low-ball and tick the seller’s off, sometimes sellers are just testing the market and will consider a crazy offer.  In the end, when working with us, we do what you ask us to do.  We will offer advice and suggestions if you ask, but this will be your home and we will ask for whatever will make your heart happy.  We have done this long enough to know you cannot predict people’s actions, so it is better to ask and be told no than to wonder if you could have gotten that deal you wanted.
  13. Do not be afraid to walk away.
    Sometimes sellers are unreasonable and you just have to walk away.  Some folks have to learn things the hard way.  We hope you have already discussed the deal breakers before you have even started viewing homes.  If you feel the seller is not being reasonable, or the price is not worth the value, walk away.  There will be other homes coming to the market.