Video Transcript - Negotiate a Home Sale
Stacey: When it comes to real estate, the best deals go to the buyers with the sharpest negotiation skills. How do you haggle like a pro? Let's find out on "What Works Now"
Voice Over: AOL and Bank of America Home Loans – helping you find out what works now.
Narrator: These days, buyers have the upper hand in real estate transactions, but don't expect sellers to accept just any offer. You still need to do your homework and determine a fair market value for a property.
Stacey: But if you're savvy, you should be able to get some extras in the deal. Let's see what the professionals have to say.
Narrator: Your first step is to do some market research.
[Enter Bryant A. Roman of Roman and Associates, PLLC]
Bryant: Given that we're in a buyer's market, buyers typically don't usually pay the asking price, that's usually just the starting point. So when negotiating the price of a property, you don't just want to go in and offer 10 to 15 percent of the purchase price. You want to do a comparables search and find out what the true value of property is and then work up or down from that number. Typically you would hire a real estate agent to help you with that.
[Stacey consulting with a real estate agent]
Agent: I say we up the offer, bring him another offer, and then get them negotiating with us...
Bryant: When determining the value of a property, I like to run a comparables search, or a comp, and that will tell me what similar homes sold for in the area. I also check the list-to-sales ratio to determine the value of the property. What that does is give me the ratio of what that property initial listed for and what it ultimately sold for.
Stacey: Is it acceptable for a buyer to come in with a really low first offer?
Bryant: Well in this buyer's market, you can certainly come in with a low offer. But one thing to keep in mind is that there is a risk that the seller may be offended by the low offer and refuse to counteroffer. So let's go see the first property
Stacey: Sure, let's go.
Narrator: next on the negotiating table: the sales contract.
Bryant: So as you know, we're in a buyer's market right now. So the sales contract is definitely negotiable. What we're going to do is put in a couple contingencies in the contract to protect you. The first thing I like to include is an inspection contingency, because if the property has a lot of damage and needs a lot of repair, the buyer may not want to buy the home.
Stacey: But what if the buyer doesn't want to give up on the property.
Bryant: Well we can always ask the seller to pay for the repairs. And, if not, we can also ask them to give us a credit off the purchase price.
Stacey: OK, that makes me feel better.
Bryant: So, another contingency I like to include in a contract is an appraisal contingency. What that allows a buyer to do is cancel a contract in the event that the bank's appraisal comes in lower than the purchase price. Because, at the end of the day, if you can't get a mortgage you can't buy the house.
Stacey: So I don't have to walk away from the deal, right? If the appraisal comes back and it's $20,000 too high, I can just ask for a $20,000 discount, right?
Bryant: Absolutely, the buyer can always ask for a discount if the appraisal comes in too low.
Bryant: Another contingency that I really like to include in a contract is a mortgage financing contingency. What that would allow a buyer to do is to cancel a contract in the event that they're unable to obtain a mortgage.
Stacey: So what would happen if I didn't have that contingency?
Bryant: If that contingency is not included in the contract, the buyer stands to lose their entire down payment.
Stacey: Yeah, I don't want to lose that.
Narrator: Lastly, given the current climate, there are a few more categories that are open to negotiation.
Stacey: I've heard many sellers are now willing to pay for a buyer's closing costs.
Bryant: Absolutely, in today's buyer's market, sellers are increasingly willing to pay closing costs.
Stacey: How much can that be worth?
Bryant: Well it can be worth up to 1 to 4 percent of the purchase price.
Stacey: Is there anything else I can do to sweeten the deal?
Bryant: Sometimes you'll have furniture or nice electronics that are built into the property that the seller will not want to remove, because they'll have to patch up the walls and do a lot of repairs. So in those circumstances, you may want to ask to include those items in the sale. But nowadays, sellers are even considering paying a half a year to a year's worth of Homeowners Association (HOA) Dues.
Stacey: I like this buyer's market.
Bryant: Yeah, a lot of people do.
Stacey: By the time you're done with the negotiations, you should feel confident that you got your dream home at the right price.
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