Per your request, this article has been sent to you by Jim Savage of ERA Belsito & Associates.
Negotiating for Your Interest Many of us subscribe to the Old West credo that a deal is finished when both parties shake hands on it. If that's your way of thinking, then be prepared to get skinned alive when you buy real estate. The modern credo is """"Never stop negotiating""""--even after the deal is signed, even after escrow has opened, even after escrow has closed and title has passed to you. If you truly want to look out for your own interests, you won't stop negotiating! Yes, this is a bit of an exaggeration. Nevertheless, those who do get the best deals in real estate are often those who keep right on negotiating as long as, so to speak, there's anything left on the table.
Negotiate as Part of Making an Offer The entire process of making an offer involves negotiation. You purchase a home at a certain price for specified terms, including contingencies that allow you to back out in certain circumstances. The sellers read you offer and then either accept or, more likely, counter at a different price and with different terms, perhaps eliminating some of your contingencies and modifying others by limiting them for example, in terms of time. Thus the sellers may agree that you can have an inspection, but you must approve the report within, say, 14 days. Back and forth it goes with counteroffers, and counters to the counteroffers and counters to the counter to the counteroffers. This is the negotiation process and, depending on how good you are at it, you'll get a better or worse deal. If you get a deal that's acceptable to you and is the best you feel you can get, and if the same is true for the sellers, there's agreement and everyone signs. The presumption is that the deal is made. Don't count on it.
Negotiate Over the Disclosures A wise buyer knows that the really tough negotiations frequently don't start until after the deal is signed. Usually the next negotiation takes place over the disclosures. Within a few days of signing, you should receive a list of defects in the property as revealed by the sellers. (If you get the list before negotiation start, then this point is moot.) If your offer was properly filled out (or if your state gives you rights here), you now can back out of the deal without penalty. If something seriously wrong is revealed, you may want to simply say no, take back your deposit, and move on. Or you may want to negotiate some more. You do this by letting the sellers know (through their agent, if they have one) that you disapprove of the disclosures because of the problem(s) they reveal. However, you're willing to go through with the deal if the sellers either repair the problem or reduce the price. If it's price you want, you indicate what you consider to be a fair price (sometimes a figure significantly lower than what was originally agreed upon), and negotiations begin again. Typically the sellers will balk, but if they want to sell and there is a problem, they very likely will counter your offer. Back and forth it goes until both parties feel they can live with the same set of terms. If something significant was revealed in the disclosures (or if you said that, in you view, what was revealed was important), you may get a significant price reduction or better terms.
Negotiate Over the Home Inspection The next negotiation frequently occurs over the results of the home inspection. It's rare that a home inspection, even of a brand new home, will reveal nothing. Usually there's something, even if it's just leaking faucets. Depending on the severity of the problem(s) discovered, savvy buyers now open negotiations all over again. How can you do this? Remember, a good inspection clause is actually a contingency that, in effect, makes the purchase subject to the buyer's approving the inspection report. You don't approve. There's no deal-unless the seller is willing to come down in price or up in terms. Keep in mind that problems such as these usually arise two weeks or so after the deal was originally signed. During those two weeks the sellers have begun making plans to move. They may even have put down a deposit and made a deal on another home. They are counting on your deal going through. Now, suddenly, there's a hitch. As the buyer, you are balking at something that came up in the inspection. You can bet that the sellers are going to be eager to smooth over the problem, if they can. I've seen deals where the price was knocked down $3,500 to handle a problem with paint, $17,000 for a problem with a roof, and $35,000 to accommodate a problem with the structure. Why would the sellers be so accommodating? It's not that they want to. It's just that once a problem is revealed, it will have to be dealt with one way or another, either with you or with other buyers. It might as well be you, since you're already involved in the deal. Further, seller sometimes simply get desperate to sell, Although they were adamantly against lowering their price or giving you a better deal during the initial negotiations, now they simply lay down and roll over. I've seen it happen. You may negotiate a cash settlement without actually having a disclosure problem corrected, provided the lender doesn't object. For example, the seller s may lower the price $5,000 over a leaking roof. However, instead of replacing the roof, you have it patched for $500 and pocket the difference (at least until the next rainstorm).
Negotiate During Escrow Some buyers with a lot of what might be called gall negotiate right through escrow. As the sellers get more and more used to the idea of their home being sold, the buyers keep coming up with new concerns that can be resolved only by further concessions from the sellers. I've heard buyers say that they drove by and became aware that the window trim was damaged. They then wanted several hundred dollars off the price to have it fixed. If not, they would simply hold off on buying the home. Yes, these buyers stand a chance of losing their deposit (and more), but the sellers won't get it either without going to court. In the meantime, the sellers' house is tied up. It simply becomes easier for the sellers to acquiesce than to fight. In a very slow market, buyers may demand a reduction in price because of market conditions. They simply tell the sellers that prices are going down. The house is no longer worth what is was when the offer was accepted. Either the sellers accommodate with a lower price or the buyers refuse the deal. Once again, the sellers have options, none of them particularly good in a down market. And many will acquiesce to placate an irritable buyer. The sellers could refuse a buyer's new terms, then demand the deposit, or even demand specific performance (the buyer either goes through with the purchase or, more likely, pays damages). But few sellers really want to go to court and fewer actually do. Buyer with gall and the willingness to risk a lot have pulled off some amazing deals in this fashion.
Negotiate After You Own the Property It is possible to get a better deal even after the escrow has closed and you take possession of the property. This frequently happens when buyers find something amiss, and demand that sellers make it good. In one case, the buyers discovered after they moved in that the sellers had allowed their pets to run wild over much of the home. A urine smell permeated the wall-to-wall carpeting in several rooms. The smell had not been detected earlier because the windows were always open when the buyers inspected the property. Further, the sellers had failed to disclose this problem. It's important to understand that animal urine in carpeting cannot really be removed. The smell will remain, often permeating the padding and even the flooring beneath. The buyers demanded that the sellers replace not just the carpeting in the rooms with the problem, but also the carpeting throughout the house, since it was all of a kind. They said it wouldn't look right to have just a few rooms fixed. After conferring with their agent, the sellers agreed. Then the buyers picked out the carpeting, which was valued at close to $15,000, installed. The sellers balked, but when confronted with the cost and possible outcome if the matter went to litigation, they sent the buyers a check for that amount. As long as there are problems, you can negotiate with the sellers. In some cases, even if the problem is something you imagine, you can still negotiate and win concessions simply because the sellers don't want to bother with the nuisance.
Remember, to paraphrase Yogi Berra, the deal isn't over until it's over. Don't pressure sellers too far. If you insist on unreasonable demands, they may simply refuse and buckle down, ready to fight you legally. That could mean you'd lose the house and have legal problems to boot.
For more information please contact: Jim & Tracy Savage (CBR) Certified Buyer Representatives Work: 781-831-0791
FOR ALL YOUR FINANCING NEEDS CALL !!!! Steve Ross National City Mortgage Sr. Mortgage Consultant 345 Court Street Plymouth, MA 02360 Cell Phone: 508-360-2115 Office: 508-746-4750 x128 Email: Stephen.ross@ncmc.com
Comments(2)