Once you find the house you want, you need to move quickly to make your bid. If you're working with a Buyer's Broker, then get advice from him or her on an initial offer. If you're working with a Seller's Agent, you're involving yourself in what's called a "dual representation" or a "limited dual representation". Be careful that the agent handling this transaction is being fair to you as a Buyer.
Your agent needs to line up data on at least three houses that have sold recently in the neighborhood. They'll calculate the difference between the original list price and the final price of the homes sold.
If the average difference is, say, 5% below the asking price, then you know you can make an offer 8% to 10% below, leaving yourself a little room to negotiate. If you really want the house, don't lowball. The seller may give up in disgust.
Another factor to consider in determining your bid is whether the trend in recent home sales is up or down over the past year. For instance, if houses a year ago were selling at list, and recent ones are going at 3% below, then you might want to sharpen your pencil for your opening bid to just 5 to 8% below list.
There's no foolproof system for negotiating a fair price. In general, don't let the other side begin to believe you are negotiating in bad faith or being deceptive. Any deal you eventually reach has to involve trust on both sides and you better make darn well sure that your agent is representing this important fact.
Be creative about finding ways to satisfy the Seller's needs. For instance, ask if the Seller would throw in kitchen and laundry appliances if you meet his price, or, take them away in exchange for a lower price. Remember, too, that your leverage depends on the pace of the market. In a slow market, you've got muscle. In a hot market, you may have none at all.
Once you reach a mutually acceptable price, your Real Estate agent will draw up an offer to purchase that includes an estimated closing date (usually 30 - 45 days from acceptance of the offer).
Even though there are set contractual laws within the Purchase Contract, have your Real Estate Agent write this document to make sure the deal is contingent upon:
1. your obtaining a mortgage;
2. a home inspection that shows no significant defects (make sure you're clear on the definition of "significant");
3. a guarantee that you may conduct a walk-through inspection 24 hours before closing. This last clause allows you to check the home after the sellers have moved out, just in case the movers cause any damage, or that big living room sofa was hiding a hole in the floor.
You also need to make a good-faith deposit which is usually 1% to 4% of the purchase price that will be deposited into an escrow account. This money will be put toward your down payment and closing costs in order to close your deal. If the deal falls through, you will get the money back only if you or the home failed any of the contingency clauses.
Now call your mortgage broker or lender and move quickly to agree on terms, if you have not already done so, which I highly recommend you do before you even start house shopping. Read Financially Preparing Yourself To Buy a Home and Top 10 things to know and to do when buying a home. This is when you decide whether to go with the fixed rate or adjustable rate mortgage and whether to pay points. You may have to pay your appraisal fee upfront and will have to pay your home inspection fee upfront but most other fees will be due at the closing.
If you don't already have one, the lender funding your home loan will require a homeowner's insurance policy before they'll approve your loan. Ask for recommendations from friends, your lawyer or your real estate agent.
In addition to the appraisal that the mortgage lender will make of your home, you should hire your own home inspector. Again, ask for referrals, or check with the American Society of Home Inspectors, a trade group. An inspection costs about $300, on average, and up to $1,000 for a really big job and takes two hours or more, usually 4-6 hours in a historic property. When buying a historic Phoenix home, you'll want to get an inspector who specializes in historical structures. I have several on my team who do specialize in historic properties. They are a little more costly than a non-experienced historic home inspector, but well worth the nominal extra cost.
Ask to be present during the inspection, because you will learn a lot about your house, including its overall condition, construction materials, wiring, and heating. If the inspector turns up major problems, like a roof that needs to be replaced, then ask your agent to discuss it with the seller. You will either want the seller to fix the problem before you move in, or deduct the cost of the repair from the final price. If the seller won't agree to either remedy you may decide to walk away from the deal, which you can do without penalty if you have that contingency written into the contract, which is automatic as long as you're within your 10-day inspection period.
About two days before the actual closing, you will receive a final HUD Settlement Statement from your lender that lists all the charges you can expect to pay at closing.
Review it carefully. It will include things like the cost of title insurance that protects you and the lender from any claims someone may make regarding ownership of your property. The cost of title insurance varies greatly from state to state but usually comes in at less than 1% of the home's price.
The lender might also require you to establish an escrow account, which it can tap if you fall behind on your mortgage or property tax payments. Lenders can require deposits of up to two months' worth of payments.
After all this due diligence, the actual closing is often somewhat uneventful, though perhaps still nerve-racking. It's a process that your real estate agent, if experienced enough, should guide you through and have your back during the ENTIRE process. Be sure to ask your agent how involved they get with your loan, with Title & Escrow, with your Home Inspector and all other parties involved in the transaction. You'd be surprised how many agents walk away after your contract is accepted and don't follow through on anything out of sheer greed, laziness and lack of knowledge and experience. This is a nightmare for so many clients. I hear it every day from buyers. DON'T LET IT HAPPEN TO YOU!
If you want that agent, you're at her website. Contact me today and I'll SHOW you!
