5 Tips for Home Buyers When Negotiating

Don’t wait to counter-offer

Responding to counter-offers is important. This is an opportunity for you to either make or break the purchase of a home. And, I’m assuming if you have made an offer on a home you really want it. By not jumping on the counter-offer you are allowing other buyers the opportunity to sneak in with a better offer, or any offer at all that the current home owner is willing to take.

You should also consider your counter-offer carefully before making it. Willing you be willing to go higher if certain criteria is met, such as repairs, or inspections. Having a contingency plan based on expected offers from the seller is good to have in your back pocket so you can respond quickly with an offer you are comfortable with.

Talk to your agent

You should always remember your real estate agent when you are making an offer. Whether you have bought one home, or multiple, it is likely your agent has been through this process many times more than you and can make good recommendations on what they think the house will sell for as well as reasonable contingencies.

In addition, your agent can approach the seller with any questions you have before making an offer, or in regards to a counter offer.

Try to get the scoop on the seller

While not always possible, you may be able to find out information on the seller that is useful in making your offer. The situation of a seller can work to your favor. For example, if a seller is motivated to sell because he or she has been transferred to another city for work. Or, perhaps the house has been on the market for several months and the seller has already purchased a new home. Both of these situations may suggest that the offer can lean in your favor. That is if you are the only offer on the table.

The same goes the other way. If the seller is contemplating renting out their home if they don’t get the offer they want. Perhaps, the home is a hot commodity, or only been on the market a short period of time. Maybe the seller simply isn’t in a hurry to move until they receive the offer they are looking for. Any of these circumstances may put the negotiation on the seller’s terms. However, you may be able to find better footing by leveraging a little compromise.

Review what you can afford

For many buyers who have been looking at homes at several hundred thousand dollars, it can be easy to think that upping your offer by $10,000 or $20,000 isn’t that big of a deal. Yet, be careful. It is always a good idea to run the numbers through your mortgage professional. Sometimes a higher offer may not affect your monthly payments, but you may also be surprised at how much the interest, taxes, and insurance can tack on.

When you talk to your mortgage professional, it is a good idea to have them run your monthly payments through several price offers, so you know what to expect, if you have to make a decision between a higher counter-offer and a lower one. 

Consider writing a personal letter to the seller

Don’t ever underestimate the power of the pen. You need to remember that to most people their home is an extension of who they are. People want to know their home will be left with another good family, and people who will care for what is essentially part of their self.

By writing a letter to the seller on why you want the home, noting specific features, and how much it will mean to you and your family to have the home you may just give yourself an edge. When you provide a personal letter, possibly even photos of your family (and don’t forget the dog) you are putting a face to a name, and taking yourself outside the bounds of simply being another number.

What Exactly is a Starter Home

Everyone needs to start somewhere, and for most people looking to purchase a home for the first time, that likely means you will be looking at a starter home.

But, what exactly is a starter home? To be fair, the term “starter home” can be representative of both a vague and broad explanation of a home typical for a first time home buyer. Traditionally in real estate a starter home is 1-2 bedrooms, although 3 bedrooms are also common. The home will also likely have 1-2 bathrooms. The home is generally smaller, with fewer than 1,300 square feet. However, these are the general characteristics. What really makes a starter home a starter home is affordability for the majority of home buyers.

Currently, on Long Island, a starter home would be considered around the price-point of $250,000 or less. Of, course this is highly variable according to the economy, season, and many other factors not-withstanding the home itself. However, as of the writing of this article, $250,000 is a good starting point.

Starter homes can come in as many styles as you can imagine. Older parts of Long Island may offer Victorian homes, and new developments may offer townhouses or condominiums.

With an economy which is becoming more stable, growth into major metropolitan areas has increased as people are trying to relocate closer to where they work, or find a home that is in what I like to call a “personal hub”. This means that the home is within a couple blocks of schools, work, and a shopping center.

For a homebuyer looking at starter homes this can be both positive and negative. If you are looking at finding a starter home within the center of an urban area such as New York City, you may have difficulties, as affordable starter homes are scarce. However, a new trend within cities in the U.S. has begun to re-zone previously commercial areas into residential, specifically focused on new starter home developments.

However, as a new home buyer, many opportunities exist in suburban, and older areas that offer both unique and affordable single-family starter homes.

Some things you may want to think about when looking for a starter home are:

·         Affordability: Many people can’t wait to buy a home. However, as seen with the housing bubble, many people stepped into the role of home ownership well before they should have. Anytime you make a large purchase such as a home, make sure you are financially able to purchase a home. Getting your personal finances in order and going through the pre-approval process are two important steps.

·         Maintenance Costs: In addition to affordability you should look at potential maintenance costs of the home. As the home will be in the lower price-range of many homes you may find a lot of “fixer-uppers”. To many people this is appealing. You have the ability to put your personal touch on the home, as well as add some sweat equity. However, it is important to weigh how much these costs will be, and assume those costs with the overall purchase price. You don’t want to buy a home and find you don’t have the money to fix it.

·         Location: Location is always important. From proximity to work, resell abilities, and if the neighborhood fits your future plans.

·         How long you will live there: The number of years you are planning to live at the home is important. This is mostly in regards to your future. For example, if you are planning on having children in the next year, but your home has only one-bedroom, the home may not be suitable to your needs. However, if you are not planning to have children for the next five years, then that same one-bedroom home may be ideal.

·         Room for growth: Is the home equipped for an expanding family, or is there room to physically add onto the house to adjust for a growing family or needs.

·         Does it have universal appeal: As a starter home, you may not be looking at living in your home for more than five years. Having a home with universal appeal helps your home become more saleable when you are ready to sell. So the question you want to answer is: Does my home have universal appeal, or is there enough to add universal appeal while I am living here?

·         Investment potential: The good thing about a starter home is affordability. With that, you may want to consider turning your starter home into an investment rental property once you move to a bigger home. If this is important to you, you may want to find out current rental trends and restrictions to see if this is a possibility in the area where the home is.