Whether you are buying or selling, your goal is to get the best deal possible.The key components to a successful real estate transaction are doing your homework, keeping your cool, and knowing when to walk away.
Step 1: Understand how financing affects the negotiation of a real estate deal.
Understanding the financial aspect of a real estate deal is the most important thing to negotiate.You should have the evidence to support your claim if you are a seller.You may only be willing to negotiate with buyers that have been pre-approved for a mortgage that will cover the price of your home, minus any down payment the buyers can make.If you know that potential buyers have access to the funds and loans necessary to purchase your home, you may only want to negotiate with them.If you're the buyer, you need to know that a lot of sellers accept deals based on your financing arrangements.If you don't have financing for the purchase, you may not be able to negotiate.You will want to show the sellers that the financing you have is stable.Being able to show the seller a mortgage pre-approval letter will go along way in securing a spot at the negotiating table.The seller may have trouble trusting your ability to pay if you only have a personal loan from a friend.
Step 2: For a down payment, have cash on hand.
Gathering enough cash to make a down payment is the first step in securing financing for a home.A down payment is usually 20% of the real estate purchase price.If you are a buyer, you will have more bargaining power if you put more money down.The lower the purchase price, the more cash the seller has.The amount of cash they are willing to put on the table should be understood by the seller.If the buyers offer more cash, you should be willing to work with them.If they are unable to offer a large down payment, you may decline their offer to purchase the property or request more money.
Step 3: You can check your credit history.
You need to check your credit score to get a home loan.The lower your interest rate is, the higher your credit score is.Banks and other lenders are taking less risk in giving money to someone with a history of paying back loans.You can check your credit score by calling one of the companies.Annualcreditreport.com gives you a free credit report once a year.
Step 4: You should get pre-qualified.
You need to know how much home you can afford and the type of loan you are likely to be qualified for when shopping for a home loan.Allow the lender to estimate how much you can afford.They will give you an idea of what you can afford if you give them information about your credit history, income, and debts.A pre-qualification letter can help you negotiate with sellers.This is proof that you can get financing.
Step 5: Shop for loans.
You can begin the search for a mortgage if you have been pre-qualified.The interest rate, loan term, the size of the down payment, and the fees associated with each loan should be considered when looking for a mortgage.
Step 6: You should get pre-approved.
A pre-approval is a firm offer from the lender.You will be able to make an offer on the home of your dreams if it is within your finances.A pre-approval letter is a powerful negotiation tool and it tells the seller that you are ready to make the deal.
Step 7: You should research the property.
You need to know as much as you can about the property.Find out the basics of age, square footage, layout and if there have been any significant upgrades or remodels.The real estate listing should include this information.If not, ask the seller.Check the city or county building department for a history of building permits issued for the property if you are not getting answers or you don't believe them.If you're thinking about buying a historical property, make sure it's listed on the local, state, or federal historical register.Depending on your goals, this can be a plus or a minus.Financial assistance and tax relief may be available for restoration and renovation if the property is registered.You may be limited in the changes you can make to the structure.You can find out if there are grandfathered allowances for the structure.Sometimes older structures are allowed to stay as long as no changes are made.The existing work may need to be upgraded if new building permits are issued.It could turn into a new plumbing project for the entire house.This should be included in your offer.
Step 8: You can learn about the neighborhood.
comparative market analysis is more important than list price.If you are working with an agent, she can run a listing of the most recent property sales and listings of comparable properties in the neighborhood.An unrepresented buyer can pay a real estate attorney or agent.Don't rely on the report alone.You can check out the properties by driving around and seeing which ones are similar to the one under negotiation.You can use the data in the report to see if the property price is in line with the current state of the market.
Step 9: Don't forget to keep financing in mind.
If a buyer has cash or pre-approved financing in hand, he may be in a position to drive a harder bargain than someone who has to wait on mortgage applications and approvals.The advantage to the seller is a firm contract with a quick closing date rather than gambling with the property off the market for weeks or months while the buyer tries to secure financing.
Step 10: A property inspection is a good idea.
As a prospective buyer, an inspection can uncover potential deal-breakers, such as structural damage, and give you a list of needed repairs to use as leverage for a reduction in price or a credit against closing costs.It doesn't have to be the end of a desirable property if a serious flaw, such as needing a new roof, is present.To get a good idea of the cost of repair, consult with a local contractor.
Step 11: The boundaries and tone should be set.
The seller has a price.You can use the report to make an offer.The two end points of the negotiation are set.The selling price will be somewhere in the middle if both parties use reliable data to create their price points.Don't insult the seller."Just to get the ball rolling" will likely be interpreted as you not being serious about buying the property.The owners are likely to refuse to work with you if you talk down the property in disrespectful terms, such as "ugly" and "worthless", and offer to take it off their hands.
Step 12: Prepare for counter-offers.
The seller will make the first counter-offer.People shouldn't get hung up on small differences in price.The difference in the mortgage is less than $20 per month if the interest rate is between 4 and 5 percent.If the seller says $195,000 and you have offered $190,000, you should accept the counter-offer.This is not a competition.
Step 13: It's time to close the deal.
All offers should be in writing.Both parties should sign the offer to indicate acceptance.Mention the sales price, any credits for repairs, allocation of closing costs and a prospective closing date.This will be the basis of your contract.If you don't have real estate agents involved in the negotiation, you should consider hiring a lawyer to handle the closing.Transactions such as title insurance, rescission clauses, calculating and apportioning taxes, and other business details can be handled to make sure the deal is fair to both parties.
Step 14: You can price your property.
The comparative market analysis will be included in the price.Equity versus pay-off amount is related to your area.An investment property in a desirable neighborhood can be listed for a higher price because you don't need a quick sale.If you have moved or need to sell quickly in order to buy a new house, you'll want to price to the lower end of the neighborhood spectrum.If you have an agent, she can run a listing of the most recent property sales and listings of comparable properties in the neighborhood.A "For Sale By Owner" seller can pay a real estate attorney or agent for a report.
Step 15: There is a pre-sale property inspection.
It's not just for buyers.If you invest in an inspection before you list the property, you can find small issues that can be fixed before the listing and more serious repairs that need to be made.
Step 16: Understand the buyer's mindset.
The buyer has many choices, unless you have a very desirable property in a hot neighborhood.He wants to stretch his budget as far as he can.Stage your property so that you can highlight its benefits in the negotiation.If the buyer expresses an interest in the appliance, add them to the deal.
Step 17: Receive the offer.
If the offer is verbal, and you think it's serious, ask the buyer to put it in writing.You can make blank forms.A written offer makes it harder for the buyer to change his mind during the negotiation.
Step 18: Prepare for counter-offers.
The seller will make the first counter-offer in the exchange.You need to think about the daily costs of owning the property and figure that into their counter-offer.Mortgage, taxes, insurance, utilities, lawn care, and HOA fees are real costs coming out of your pocket while the property remains unsold.If you have already moved, you are dealing with the risk of storm damage on the vacant property.If you are willing to continue to pay the costs while waiting for another serious buyer, you should ask yourself how much the property has cost since you put it on the market.Your counter-offer should include these costs.If you don't have a lot of interest in the property, come closer to the buyer's offer.Don't let your guard down.Don't respond with anger or sarcasm if the buyer's offer is low.If you want to show your position, make a counter-offer.The buyer may be a poor one.You may lose a serious buyer if you call the buyer cheap or ridiculous.Some of the closing costs should be assumed or split.You can split the costs of title insurance, real estate attorney, and other fees if the buyer insists on an inspection.
Step 19: Consider owner financing.
If you have an otherwise qualified buyer who can't get a conventional mortgage because of credit issues or the bank will not lend on the property, you can carry the loan yourself.You may have to deal with a loan default if you don't get paid immediately.You may be able to realize a higher purchase price.If you don't have experience with setting up loan agreements, consult with a real estate attorney to craft the best one for you and the buyer.
Step 20: The deal needs to be closed.
The final offer should be signed by both parties even if it is an informal document.Your sales contract will be based on this.The final contract and closing documents should be prepared by a real estate agent or attorney.Set a closing date that is far enough out to allow title work to be finished and your attorney to prepare the final contracts and deed.It should be 30 to 45 days.