Buying A Home

Getting A Fair Price

Most of us are concerned about paying "too much" when we buy a house. There are several things that can be done to educate yourself. The trick is knowing how the game is played, what the other side wants and how to establish a fair price.

Most of the time, you will be expected to give a deposit or earnest money with your offer to purchase real estate. The more money you can come up with at this point, the better position you will be in to negotiate.

Put yourself in the sellers' shoes: Your offer will be taken more seriously you accompany your offer with a check for a reasonable amount of earnest money. You should also have a letter from your lender stating you have been prequalified for a loan. That will give you even more credibility.

A basic rule of thumb is: The more you want to negotiate the price, the higher the earnest money should be. There are only four basic things that one negotiates when purchasing a house: Price, dates, personal property, and earnest money. If you want the best price, you cooperate on the sellers' dates, and don't ask for anything extra in the personal property. If the date of closing is important to you, you may have to flex on the price if the date doesn't suit the seller. If you want extra personal property that the seller didn't plan to leave with the house, you'll probably pay a bit more.

When buying with a realtor, keep in mind that typically the agent listing the home is being paid by the seller and their first allegiance is to the seller. That does not mean that he or she won't treat you fairly. It does mean that the real estate agent is legally obligated to tell the seller anything you say that has to do with the negotiations. In Washington, you have the option to work through a “buyers” agent. These agents are not obligated in the same way to the seller, however they are obligated to conduct all negotiations in an upfront and ethical manner.

Prior to making an offer to purchase, you need to find out the sale price of comparable homes in the immediate area. Real estate transactions are public information. In most areas, your realtor should be able to obtain that information and explain the reasons of different prices. You must expect to pay the seller a fair price, but you don't have to overpay. When comparing the prices of other houses that have sold, you want to compare similar properties. This process will assure you that you are not paying too much. If the house you want has a garage and the other house sold didn't have one, you'll usually pay more for the added feature.

Adding or subtracting for condition seldom changes the price by much more than 5%. If you're going to pay much more than a 5% premium, (for super good condition) go to a better neighborhood with your money!

After you've seen the other recent sales, decide what you want to offer the owner. When the list price is within 10% of the previous sales prices of comparable homes, usually offers that are within 3% of listing price have the best chance of being successfully negotiated. Paying full price isn't out of the question if the seller has priced it accurately.

Different sellers handle the actual presentation of an offer in various ways. When realtors or other agents are involved, either one or both of the agents present the offer to the seller. Ask your agent for a time frame. At what time will the offer be presented to the seller? When can you expect to have a response? This is usually within twenty four hours or so. Try also to schedule when and where can you get together again if there are changes to the offer. There is not a contract until mutual agreement of all parts and all changes are initialed by all parties. It is tempting to let the details go until "tomorrow", and that may cause problems if another offer comes in, and the seller can change his mind. Until that contract is fully executed, that is, signed and all changes initialed, you have not bought the house.

During the negotiation process, be flexible. You might choose to put a few things on the contract that you are willing to let go. For example you may ask for the refrigerator that you don't really have to have, so that you can give it back later as a point of concession. However, in a seller’s market, there are often multiple offers if the home is priced correctly. Your first offer should give up as much as is reasonable and work with the sellers' dates when possible. Don't be greedy and miss your dream home over a few pennies, it's not worth it in the long run.