Buying A Home In Cleveland - The Complete Guide Part 5 of 7 - Negotiating An Offer
In an effort to help educate those buying a home in Cleveland, we have put together a 7 part series that will explain the entire home buying process in detail. Although our focus will be on the Cleveland market, many of the ideas discussed can be applied to other areas of the country as well. We recommend that you read the first 4 articles in the series at some point, preferably prior to reading step 5 as all of the information ties into each other.
Step 2 "The Pre-approval Process".
Step 3 "Selecting and Previewing Homes."
Step 4 "Writing An Offer".
Here in Step 5, we will be covering what may be the most important step yet when buying a home in Cleveland, negotiations. In this article, we will discuss the different steps of the process and go over popular strategies used to achieve success. We will also offer a few tips to help ease your mind during this very stressful part of the home buying process.
At the end of Step 4, we spoke in depth about the purchase agreement and mentioned that we would tell you how to best structure it so that it would be accepted. Before we get into details, one important concept to understand is that every seller has a bottom line price that they will take for their home. The challange is that you will not know what that number is up front and neither will anyone else, not even the listing agent. In fact, sometimes the sellers won't even know what their bottom line price is until they start to really crunch the numbers after they receive an offer. A good buyer's agent will be very beneficial in helping you negotiate and get you the right price.
So, how do we get the sellers to accept an offer? The best thing to do is give the sellers as little to think about as possible. The more decisions they have to make, the harder it will be. When representing a buyer, we like to communicate with the listing agent up front to determine what is important to the seller in regards to closing dates. Since dates, as explained in Step 4, is one of the key negotiating items, if we know up front what dates the sellers prefer, and that also works for the buyer, we can fill in the purchase agreement accordingly knowing that this will make everyone happy and won't be an issue.
We do the same thing with earnest money as well. If we can tackle these two items up front, we will know with confidence that our offer contains dates and acceptable earnest money figures that the seller has already agreed to and won't be a point of contention. We will then be left to concentrate on only one item of the purchase agreement instead of three. This item is price and will often be the toughest thing to negotiate.
When buying a home in Cleveland, the most common question a buyer typically asks during the negotiating process is "what price do we offer?" While an agent cannot directly tell you what to do, we can guide you with statistics and offer different strategies. When all is said and done, this is your money and you have to be comfortable with decisions made during the negotiation process.
Here are 3 common strategies used by buyers when making an offer:
1. Go In Strong
2. Start Slow and Go Up
3. The Low ball
Making a strong offer can save a lot of time and energy. If you know that a home is really great, there are probably other buyers who feel the same way. A nice home priced fairly will sometimes even get multiple offers, so going in with a strong offer says that you aren't playing games and are serious. Remember what we said earlier about every seller having a bottom line number? Well, if a house is by far the nicest in its price range, it will be obvious to everyone, including the sellers. This means that it may take a strong offer to get a home as competition, even in a buyer's market, can be fierce.
Some buyers are more comfortable starting lower, knowing that they can always go up in price if needed. They realize the seller probably won't accept their initial offer, but they feel like they need to try a lower offer just to see what happens. This tactic may cause you to lose a home if you end up in a multiple offer situation as the sellers could choose to only negotiate with the buyer who gave them the highest initial offer and it isn't your offer.
Low balling is a technique that some buyers use although it could end up angering the sellers and negatively affecting negotiations. Since the negotiating process can be very personal and emotional, it is best to consider this tactic only on a bank owned home as decisions here are based purely on numbers, not emotions. Offering a ridiculously low price on a home could end up hurting a buyer more than helping them. We have personally had buyers lose out on homes they really wanted by using this tactic. One seller was actually so upset at our low ball offer that he took less money from another buyer because he didn't want our buyer to have his home.
After making an offer, the ball is now in the sellers' court and they can respond one of three ways. They can:
1. accept the offer
2. reject the offer
3. counter the offer
The process can be done quickly or things can go back and forth numerous times. Because every situation is unique, there is no one set procedure for negotiating. Sometimes it takes 20 minutes to negotiate a successful transaction and in extreme cases, it could take months. If you really want a home though, it is best to get things done quickly because until both parties' signatures are on the paperwork, the home is still on the market and open for other offers.
Overall, the negotiating process can be extremely stressful and even lead to many sleepless nights. Most people, even the most mild mannered, can lose their patience and temper during this process. However, there are some things that can be done to make the negotiating process a little easier.
Proper communication is important and that starts with your buyer's agent. Remember, all conversations with your agent are confidential, so talk to your agent and be open and honest during this process. They have experience negotiating purchase transactions on a regular basis and will be a good source to guide you through the process.
It is also critical to focus on your goal. You are trying to buy a home in Cleveland and if you find one you love, don't let your emotions keep you from getting it. During negotiations, many buyers feel "the sellers are being difficult", or out of principal, you just don't want to budge any more on price. These are all natural thoughts that buyers encounter during the negotiating process. However, try to keep in mind that you will get years of enjoyment out of your home and the sellers and unpleasant memories of the negotiations will be long gone after closing, so try your best to keep things in perspective.
Click below to find out what happens during Step 6 in our series of 7:
* Please note that the Schuman Team, Amy and Dan Schuman, are licensed real estate agents in the State of Ohio but are NOT licensed to practice law. We want to be clear that information contained here should not be interpreted as legal advice. All buyers are welcome to seek the advice of a qualified real estate attorney prior to signing any legal documents.
About The Authors:
This information is provided compliments of Amy and Dan Schuman, The Schuman Team Keller Williams Realty. The Schumans have worked with numerous professional athletes, business owners, and those relocating to Cleveland from out of the area.
If you are considering buying a home in Cleveland or surrounding suburbs,please contact the Schuman Team at 216-346-3235.
VIEW ALL CLEVELAND AREA HOMES FOR SALE BY CLICKING BELOW
Buying A Home In Cleveland Part 5, Negotiating An Offer is the property of The Schuman Team and may not be duplicated or used without their written consent. ©Aug 2009