Once you’ve found the right house, it is time to make an offer.
When it comes to this, I can easily write a book about negotiation styles. There are just so many different ways to go about this and so many intricacies of negotiating a deal. First of all, from a buyer’s perspective, it’s very important that you offer a price that you don’t regret offering if the seller doesn’t take your offer. And when doing this, it’s very important that you think long term. This means that if you lose the deal, you don’t think to yourself, “Dang, I should have just come up with an extra $5,000.” I can’t tell you how many buyers have said this to me and regretted not paying a little bit more.
Offer what’s needed to get what you want!
My advice to them is just why didn’t you offer more? That’s my recommendation from a buyer’s perspective, especially if you’re planning for this to be a very long term hold or something that you’re going to live in for a very long time. Just think to yourself, 10 years from now, are you going to care if you paid an extra few grand for the property? Chances are, 10 years from now, it’s not really going to matter. So it’s just important at the end of the day that you don’t have any regrets with what you offer. If you offer the highest price and someone else out-bids you on that, at least go into it thinking, “I paid as high as I was willing to go.”
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And if someone is willing to pay more than you, so be it. It wasn’t meant to be and this wasn’t your perfect home because it was over your budget. Just to put this all in context as a buyer, coming up in price $10,000 is really only a difference of about $55 per month in your mortgage. So just think to yourself if getting the perfect property is worth an extra $55 a month. And if the answer is yes, then go for it. And if the answer is no, then don’t.
Don’t get emotional with Real Estate
It’s also very important not to get overly emotional and overpay for the property. This is why it can dramatically help to have a real estate agent assisting you who’s not going to get overly emotional about the property, who can talk you down from doing something you shouldn’t do. It’s really important that you at least have someone that you can consult with throughout the entire process. Let’s assume that Auntie Sally got your offer accepted. And now it is time to do your do diligence on the property and have your inspections.
When it comes to this, I recommend doing as many inspections as you possibly can. If you can inspect it, I recommend getting it inspected. And that could be a general inspection, roof, plumbing, electrical, foundation , termite, or sewer line inspection. Basically, whatever inspections there are, I just recommend you do them all.
Many buyers will use the inspections as a way to renegotiate the deal. So they know that they will do all these inspections, they might spend 1500 dollars doing every inspection possible, and they’re going to find almost guaranteed more than 1500 dollars worth of repairs. So they use the inspections as a way to renegotiate the purchase price through an escrow. Once they have the sellers where they want them, the seller’s already accepted an offer, they want the sale, they’re tired of showing the property, and they don’t want to keep it on the market. The buyer kind of has the leverage right now because the buyer did all the inspections, know what’s wrong in the property, and asked for credit. And many times the sellers are so worn down that they’re just like, “Here’s the credit, close the deal, go away, I just want to be done with it.”
Make a list of things that need repair/replacement
What was taught to me as a real estate agent, and what many other agents are taught to do is itemize an inspection report. Itemize everything that’s wrong with it and you associate a price with that. So for instance, I see many real estate agents will do a home inspection, and then line by line, itemize everything that’s wrong with a total at the bottom. This will be things like:
Repairing a sink: $100
Fixing a leaky roof: $1,000
Repairing water heater: $1500
They itemize every little thing with the total at the bottom. What ends up happening every single time is that the seller gets this list, then they see the large number at the bottom and say that they can do all those things for less. Because of that, they don’t focus on the larger number. And they’re more likely to renegotiate the entire thing when they see item by item by item.
On the other hand, if you just give the entire report and say all the repairs will be $20k but you’re willing to take $15k off instead, you’ll likely close the deal. Sellers will not go item by item disagreeing with a leaky water faucet and everything else.
Consider Closing costs:
Now we’re going to talk about closing costs. This includes charges like your escrow costs, title, insurance, and everything else that come in the escrow process. For the most part, this is about 1% of your homes purchase price on a $400,000 home; the closing costs are going to be about $4,000. One percent of the purchase price is a rough estimate. Hopefully by now, you’ve closed on your home and now it’s time for you to fully enjoy it.
The biggest takeaway here is that when it comes to buying a home for yourself, it’s more important to buy a home that you’re happy with long term, not necessarily the home with the most upside or the most rental potential or anything like that. It’s more important for you to be happy in this long term, for yourself and your family!
Making an Offer
USDRE Guide to Buying a Home
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