Negotiate Your Best House Buy

Negotiate Your Best House Buy

Article From BuyAndSell.HouseLogic.com

By: G. M. Filisko
Published: June 04, 2010

Keep your emotions in check and your eyes on the goal, and you'll pay less when purchasing a home.

Buying a home can be emotional, but negotiating the price shouldn't be. The key to saving money when purchasing a home is sticking to a plan during the turbulence of high-stakes negotiations. A real estate agent who represents you can guide you and offer you advice, but you are the one who must make the final decision during each round of offers and counter offers.

Buying a home can be emotional, but negotiating the price shouldn't be. The key to saving money when purchasing a home is sticking to a plan during the turbulence of high-stakes negotiations. A real estate agent who represents you can guide you and offer you advice, but you are the one who must make the final decision during each round of offers and counter offers.

 Here are six tips for negotiating the best price on a home.

 1. Get prequalified for a mortgage

  Getting prequalified for a mortgage proves to sellers that you're serious about buying and capable of affording their home. That will push you to the head of the pack when sellers choose among offers; they'll go with buyers who are a sure financial bet, not those whose financing could flop.

 2. Ask questions 

 Ask your agent for information to help you understand the sellers' financial position and motivation. Are they facing foreclosure or a short sale? Have they already purchased a home or relocated, which may make them eager to accept a lower price to avoid paying two mortgages? Has the home been on the market for a long time, or was it just listed? Have there been other offers? If so, why did they fall through? The more signs that sellers are eager to sell, the lower your offer can reasonably go.

 3. Work back from a final price to determine your initial offer

 Know in advance the most you're willing to pay, and with your agent work back from that number to determine your initial offer, which can set the tone for the entire negotiation. A too-low bid may offend sellers emotionally invested in the sales price; a too-high bid may lead you to spend more than necessary to close the sale.

Work with your agent to evaluate the sellers' motivation and comparable home sales to arrive at an initial offer that engages the sellers yet keeps money in your wallet.

 4. Avoid contingencies

 Sellers favor offers that leave little to chance. Keep your bid free of complicated contingencies, such as making the purchase conditional on the sale of your current home. Do keep contingencies for mortgage approval, home inspection, and environmental checks typical in your area, like radon.

 5. Remain unemotional

 Buying a home is a business transaction, and treating it that way helps you save money. Consider any movement by the sellers, however slight, a sign of interest, and keep negotiating.

Each time you make a concession, ask for one in return. If the sellers ask you to boost your price, ask them to contribute to closing costs or pay for a home warranty. If sellers won't budge, make it clear you're willing to walk away; they may get nervous and accept your offer.

 6. Don't let competition change your plan

Great homes and those competitively priced can draw multiple offers in any market. Don't let competition propel you to go beyond your predetermined price or agree to concessions--such as waiving an inspection--that aren't in your best interest.

 More from HouseLogic

 Determine how much mortgage you can afford (http://buyandsell.houselogic.com/articles/4-tips-determine-how-much-mortgage-you-can-afford/)

Keep your home purchase on track (http://buyandsell.houselogic.com/articles/keep-your-home-purchase-track/)

Plan for a stress-free home closing (http://buyandsell.houselogic.com/articles/7-steps-stress-free-home-closing/)

 G.M. Filisko is an attorney and award-winning writer who has to remind herself to remain unemotional during negotiations. A frequent contributor to many national publications including Bankrate.com, REALTOR? Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.

Keep your emotions in check and your eyes on the goal, and you’ll pay less when purchasing a home.

Visit houselogic.com for more articles like this.

Copyright 2015 NATIONAL ASSOCIATION OF REALTORS®

Question: I Want More Commission Than What is Offered in MLS, but Don't Want to Violate Any Laws or the REALTOR Code of Ethics

Question:

I just closed on a property and found out that the listing agent did not split the commission evenly. This has happened to me several times. I just want listing agents to give me "my fair share"? I worked just as hard with my buyer as the listing agent showing many properties. Do I have to accept what is offered in MLS or can I ask the listing agent to split the commission evenly with me?

Answer:

   First of all, there is no such thing as "fair share" in commissions. All "good" agents work very hard for their pay whether they are representing a buyer or a seller. By showing a property and writing up an offer, you agree to the compensation offered in MLS.

 
Standard of Practice 16-16 under Article 16 of the REALTOR® Code of Ethics states that a REALTOR® acting as a buyer's representative may not use the terms of an offer to attempt to modify the listing broker’s offer of compensation or make the submission of an offer contingent on the listing broker agreeing to modify the compensation.

   ​So, if, as Realtors and buyer agents, we adhere to the Ethics Standard of Practice, do we have to accept the co-broke % offered out in MLS?

   The short answer is no, we don't have to accepted what is being offered, but there is a "But".

   You cannot ask the listing agent to change to offer of compensation that is listed in MLS because that WOULD be a violation of the REALTOR Code of Ethics. The listing agent has a contract with their client, the seller of the property. If you are asking the listing agent to change the compensation offered, then you are considered interfering with the contract that the listing agent and his/her client has, which not only violates the Code of Ethics, but could also have legal ramifications with contract law.

   The listing agent MUST have the same offer of compensation in MLS as (s)he has in the listing contract. You can't have a 50/50 split in the contract (for example only - 5% total and 2.5% to buyer agent) and turn around and offer a lower split in MLS (such as 2% on a 5% total commission). THAT would be a violation of the contract by the Listing Agent. Unfortunately, there is no way to prove that because the Listing Contract is private between the Listing Agent, his/her broker and the client.

   Then how do you get more compensation if you don't like what is offered in MLS without violating the Code of Ethics and/or contract law? What you have to do is at the time the offer is made (or before) give a letter (or form) to the listing agent rejecting the compensation in MLS, and asking the Seller to pay your fee directly to you at closing from the seller's proceeds. The compensation is then paid directly from the seller (via the closing attorney) to your brokerage. Now technically, the listing agent would still have the right to get his/her full compensation from the seller as per the listing contract, so the seller would end up paying 7 1/2 percent if you asked for 2 1/2% using the above example. Of course, in that case a reasonable & fair listing agent should reduce his/her compensation from the seller by the amount of co-broke compensation contained in the listing contract (5% minus 2% = 3% for example, for a total of 5 1/2% paid by the seller).

   You do have to explain to your buyer client why you are asking for more compensation than what is offered in MLS (because you're worth it!), and have then sign the letter/form agreeing to it. The drawback is that if you are in a multiple bid situation, you could hurt your clients chance of getting his/her offer accepted because the seller could receive slightly less proceeds from the sale.

   Of course, you could have your Buyer sign a contract before showing any properties and avoid the situation in the first place.

Disclosure: All percentages and offers of compensation contained in this article are used as examples only. Check with your own broker or your company policy for more information. Avoid any possible anti-trust violations by never discussing commissions with another agent/broker.

Questions/Comments?

Jim Armstrong
Broker/President
Armstrong Field Real Estate