As promised, I'm going to spend a little time blogging about negotiating the sale or purchase of a home. I think that the first and most important tip that I can give is to be prepared. I know that this sounds like common sense, but I can't tell you how often I'm involved in negotiations with people who clearly have not done their homework. Let's take a quick look at what the buyer should do to prepare for the negotiating process:
Buyer Negotiation Preparation:
1. The very first thing that a buyer should do is to know what they can afford. This entails getting pre-approved by a reputable mortgage lender. Often times I've seen buyers enter into negotiations on a home that they truly cannot afford, and this is just a waste of everyone's time and effort.
2. The buyer should also educate themselves as to the value of the home in question. The easiest way to do this is to look at the comparable sales in the market place. Occasionally I'll see buyers make an offer on an overpriced home, only to see the transaction fall apart later when the appraisal comes in below the sale price and the buyer can't get enough money from their lender.
3. The buyer should also decide on the maximum price that they would be willing to pay for the property. If this isn't done before the negotiations begin, it is too easy to get carried away and end up paying more than you had planned. How the buyer decided on this price is really up to them. It may be that they want a certain discount to the market, or that they are looking for a specific monthly payment. Whatever the method, it is important to know this up front.
4. The buyer should also know as much as possible about the seller. Has the home been on the market for quite some time, and the seller is desperate? Would the seller be willing to provide financing at a below market rate? Is the closing date more important than the price of the home? Does the seller have reasonable expectations as to the value of their home? It is important to find out the answer to all of these questions and more. The more you know about the seller, the better able you are to produce an offer that is mutually beneficial.
These are the most basic steps for being prepared for the home buying process. I'll address the preparation for the selling side in a future post.
If you'd like help negotiating the purchase of your next home or investment property, please give me a call today.
Joseph Cacciapaglia, MLERE
Realtor Associate®
R&I Realty
15 Potter Street
Haddonfield, NJ 08033
Office: 856.795.3111 x268
Cell: 979.218.2286
Jcacci1@gmail.com
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