Creative Negotiating Tips for Homebuyers

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Last week I wrote about actions you can take to give yourself a better opportunity to buy a home. One of the actions I listed included negotiating with creativity, a crucial opportunity area if you don’t have the budget to fire a money gun on top of your offer. If you partnered with a rockstar real estate – another key action from last week’s post – they should be able to provide expert consultation on your options.

Before you can offer a smart sweetener to your offer, you and your agent need to dig up as much information about the seller as possible. Such information is crucial as it keeps you from shooting in the dark. Why make an offer that the seller doesn’t care about? With that being said, what does negotiating with creativity look like in practice? Check out the options listed below that were sourced through a conversation with my favorite realtor as well as personal research. Maybe they'll spark a bit of inspiration for you - and your agent.

Write a letter

Writing a letter seems to be an idea that many prospective homebuyers are considering. However, if you’re bidding in a crowded field and you’re the only buyer writing a letter (and writing it well) you could land yourself in the heart of the seller. After all, some sellers are moving out of a home that offered them so many memories. And sometimes, those sellers would prefer that the next occupant that occupies the home can generate just as many special memories. Work with your agent to craft the letter and above all, make sure that it’s sincere and coming from the heart. Of course, the seller has to care. But having an open mind can pay dividends as it did for one couple in California.

Allow seller to live in the home after sale

The only thing more challenging that buying a house in this market is buying a house and needing to sell your current one. The timing needs to be just right, especially if you need to sell the house to afford your desired home. Now when you’re shopping for a home and you know that the seller is in the same predicament, you can consider adding a clause whereby the seller can live in the home rent free for a stated period of time. A couple in Colorado won a house because they allowed the seller to live in the house rent free for two months. Of course, the major downside with this approach is that you’ll have to pay for your existing living situation and the mortgage of the new home.

Closing earlier

Some sellers want to close the deal and get out quickly. If other buyers aren’t willing to close the deal on the seller’s preferred terms, you can swoop in and close quicker than the rest. See if you can figure out how quickly the seller would like to move out and position your offer accordingly.

Offer earnest money deposit as non-refundable

An earnest money deposit (or EMD) is a good faith deposit that demonstrates your commitment to finalize the deal, often totaling around 5-10% of the purchase price. If you terminate the deal, the EMD will be returned to you (assuming you terminate based on one of your contract contingencies). To give yourself a leg up against other bidders, you can consider making a portion - or all - of your EMD non-refundable. Just know that if you walk away from the deal, you lose the money.

Waiving inspection items that need repair

There’s a difference between waiving an inspection and waiving repairs found during the inspection. While not required, you must get an inspection in my opinion. What’s the point of buying a house if there are expensive skeletons in the closet, especially if you’re cash-strapped? Traditionally, after the inspection the prospective buyer will request that the seller to make a few repairs. In this market, if the inspection doesn’t reveal any major flags (“major” as defined by you), then you might consider holding off on requests. If you're feeling a bit more bold, you can conduct an "inspection for informational purposes only" which communicates to the seller that you'll be conducting an inspection but won't ask for repairs.

Offer to pay the transfer tax

Uncle Sam taxes everything, including the transfer of the home from one owner to another. Typically, the transfer tax is split 50/50 between the buyer and seller, and it isn't particularly onerous in some areas, such as suburbs, where it could range from 1-1.5%. Despite the amount being relatively modest, offering to cover the transfer tax could make a big impression on the seller.

Of course, the list above isn’t exhaustive and none of the options will be successful if your offer isn’t competitive; it’s just outright unlikely that any sweetener will make up for a $10k+ gap in your bid. But having a mindset that enables you to believe that homeowners care about items other than the price can be the strategy that helps you win in this competitive landscape. As you navigate the process, always lean on your agent/realtor for expert advice and counsel. (And in the event you need legal advice, get a real estate attorney.)

Stay positive and good luck!

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