Author Topic: First Time Home Buyer Negotiating  (Read 2421 times)

DLJ154

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First Time Home Buyer Negotiating
« on: October 16, 2014, 10:43:55 AM »
My wife and I are in the process of buying our first home.  We have gone through a ton of research, set back and watched listings, identified the area we want to buy in, and now found a house we are ready to make an offer on.  Now I am trying to figure out how to go about negotiating and making the offer. 

The house we are looking at is listed at 173,000 and has been on the market 31 days.  It is posted here http://www.zillow.com/homedetails/2237-Gablefield-Ln-Durham-NC-27713/59712069_zpid/ on Zillow. 

Our agent told us he thinks the seller is likely to drop the price soon due to the time it's been on the market.  On top of that, we have things I've never heard of until today like due diligence and earnest fees to negotiate.  We will be using a VA home loan, so the inspection and approval time may be longer than normal.

What advice does anyone out there with similar experience on either end have?   

Sylly

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Re: First Time Home Buyer Negotiating
« Reply #1 on: October 16, 2014, 11:07:32 AM »
My comments may be influenced by my local RE market, which may be different from yours, and my buying experience was during a somewhat 'hotter' market, where good, well priced properties don't sit very long. Properties do seem to sit a little longer now, even in my area.

That said.. based on the pictures it looks like a decent, turnkey property. That it's been sitting so long suggests price is too high, or there is some other a complicating factor.

But.. a look at movoto and redfin says the property is pending & contingent. Is that you, or did someone else get in before you?

Either way, for this or the next property..

In terms of due dilligence, my main advice is to get a good home inspection. Check the attic. Check the crawlspace. Check everything. But it's not just the inspection. You want to know all you can find out about the property. Read the HOA CC&R's. Find out about any additions, repairs, permits, etc.

I personally didn't care too much about how much earnest money was put down. We made an offer because we're serious and not planning to walk away. For one property, we put the maximum earnest money we could and ended up walking away because of issues with the property, and got all our money back.

For price, get good comparables and determine for yourself (not just from your agent) what those comparables say the property is worth. Realize that it's not always a straight up $/sqft either. For example, significantly larger houses tend to have lower $/sqft, so do singlemulti-level homes. Your best bet is finding comparable properties that are as much like your property as possible, in terms of size, characteristics, location, etc. Then ask yourself what it's worth to you. You don't want to overpay, whether it's relative to what the market say, or whether it's relative to how you value the property.

edit: typo & correction
« Last Edit: October 16, 2014, 12:26:46 PM by Sylly »

Bob W

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Re: First Time Home Buyer Negotiating
« Reply #2 on: October 16, 2014, 11:30:55 AM »
Really a good agent should be able to give you all the advice you need.  But remember, (at least in my state) if you are not working with a "buyers" agent then your agent technically works for the seller.  Agents are generally highly motivated to sell homes.

If your agent isn't answering your questions to your expectations then suggest you meet with their senior brokers for more in depth answers.

Buying a home can be stressful.  Plan your selling and exit strategy before you buy.  Don't buy out of emotion,  be willing to walk away and make an offer lower than you think is reasonable. 

And very importantly keep a cash/investment reserve account equal to 10% of the purchase price in case of unforeseen reasons you need to sell the home within the next 2 years.   That 10% will cover your loss due to real estate broker fees on the sale and a small discount to move it fast.   

If your mortgaging I generally recommend a 30 year loan.  You can always pay more principal if you decide to.   

I also like interest only loans.  (not variable) You could probably get a 7 year lock.  The reason is that this gives you control over your money.  Instead of paying down on the house invest the difference (and lots more). 

Good luck!

DLJ154

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Re: First Time Home Buyer Negotiating
« Reply #3 on: October 16, 2014, 11:59:08 AM »
Thank you both for the advice.  Just some clarifying details, we do have a buyers agent who we sought out through recommendation of a friend and we connect really well with him.  He is giving us great advice, but I just like to ensure I do all of my research possible to learn both for this experience and the next one.

He has been pretty thorough pointing out flaws in each of the homes we have looked at, some fairly obvious and some I never would have noticed.  The biggest flaws he has pointed out with this one are areas of water puddling in the back yard (away from the house), a couple of cracked window seals, and an aging AC unit.

As far as the house being listed as contingent/pending, I don't think that is us unless someone decided we were so enthusiastic today that they may as well go ahead and take it off the market.  Trying to confirm, but I think someone may have slipped in ahead of us.  This is the second time this has happened today.  Ugh. 

thedayisbrave

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Re: First Time Home Buyer Negotiating
« Reply #4 on: October 16, 2014, 12:10:55 PM »
When I click, it still says "FOR SALE"...

Hey, that's just down the road from me! It does seem a little over priced for what you're getting.  I know people who live over near South Durham and they enjoy the area.  (I'm in Raleigh)

I was going to say, just make an offer you think is fair but sounds like you already did that? I tried to go look at property in Durham last month - I believe it was on the market for a grand total of something like 12 hours.  I called to make an appointment to view it and was told there were already 4 offers - d'oh! So it's just the name of the game these days unfortunately.  Keep us posted!

DoubleDown

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Re: First Time Home Buyer Negotiating
« Reply #5 on: October 16, 2014, 12:42:44 PM »
Aw, I hope you didn't have someone sneak in before you. Here are some recommendations that should help in any offer/negotiation you make, whether on this house or any other one:

1. Know your market (which it sounds like you already do) so that when you find a property that suits you, can act fast. If I see a property I like, I make an offer on it immediately since I know that a quality property will get offers soon enough. By immediate, I mean I make an offer on the spot or within a couple of hours after viewing it and doing a few checks. If you sit on it for a few days and hem and haw about whether to make an offer on it, there's a good chance you'll miss out.

2. In the same vein as #1, make an offer on a house you like before it hits the market. You can do this in a variety of ways, even as simply as responding to "Coming Soon" advertisements.

3. Put a very limited duration on your offer so that the seller cannot "shop around" your offer. I make my offers expire after 24 hours.

4. Provide a strong earnest deposit, maybe around 5%. That will set you apart from other buyers, and shows the seller you mean business.

5. Make a reasonable offer based on your knowledge of your local market. "Reasonable" will depend on tons of factors including how long the property has been for sale, what competition is around, the condition of the house, and on and on. But don't make an outlandishly low offer just to test the waters, unless you know what you are doing as an experienced investor, or if you are okay with insulting the seller and losing the property.

6. Make your offer a very specific and somewhat oddball amount that ends in tens or hundreds, like $171,400 or $96,280. Don't pick a number that ends in "000" or "500." This will suggest you picked a very specific number for a very specific reason (particularly that you know exactly what the house is worth and what you are willing to pay for it). Offering the typical, rounded amounts like $171,000 or $99,500 tells the seller you are ripe for a counter-offer and ready, willing, and able to negotiate. If they question your specific amount, simply tell them you have researched the value of that house, and that is exactly what it is worth. This works.

7. Never waive inspection contingencies, unless you are an advanced real estate investor and know what you're getting into.