Most Common Negotiables in a Real Estate Transaction:
While many home buyers and sellers focus on price, there are many common negotiables in a real estate transaction that you should be aware of.
- Earnest Money Deposit: How Much? Is it due in one lump sum or multiple installments? At what point in the contract is it due? Does it “go hard” at any point to secure the seller’s risk?
- Inspection Period: Since you may cancel your contract without risk during an inspection period, the shorter the better for most sellers. Buyers should ensure they have enough time in the inspection period to get quotes from specialists for any items that require repair in the home inspection report.
- Appraisal Contingencies are tough if the seller has an over-improved home or there have been distressed sales close by. Removing an appraisal contingency means that if the home is valued at less than the purchase price, the buyer can’t cancel the contract based on the failure to appraise. However, the buyer will likely still be protected by the finance contingency. The buyer can bring additional cash to the table as the mortgage company will not lend above the appraised value. A cash deal without an appraisal contingency is risky for the buyer because, in a seller’s market, the seller will be less likely to reduce the purchase price to make up for the appraisal deficiency. If the appraisal comes in very low when there are no contingencies left in the contract, the buyer may be better off forfeiting their earnest money deposit than paying way above value.
- Home Warranty purchases and costs can be apportioned in many ways, buyers may ask the seller to buy at closing in lieu of asking for repairs or updates. Home warranties are worth looking into.
- Repairs and Credits for repair or replacement of inspection issues.
- Closing Credits can cover a significant part of your downpayment or prorations included in the contract. You can make a very attractive offer to a seller for a higher price, better terms, and faster closing to offset the seller’s decrease in net proceeds from closing credits. Ask your agent & lender.
- Closing Date is important to the seller because it factors into their carrying costs, relocation plans, and purchase of a new property. They worry that if it takes too long you may not close and they will have wasted valuable market exposure time. Or depending on their situation, they might want more time to close.
- Leaseback is the term for allowing the seller to stay in the property for a period of time, accompanied by a lease for a rental amount. This may make your offer very attractive for a seller that needs more time to make arrangements for their move. An inexpensive leaseback can be a great tool to get your offer noticed in a multiple-offer situation.
- Buyer Financing can affect appraisals, inspections, loan costs, loan amounts, and closing times. Do your due diligence and make the best EDUCATED decision for you.
- Furniture may be written into a contract but cannot be financed into a home loan. Selling furnished might be convenient for an out-of-state seller. On the other side, perhaps you want to ask for a custom kitchen table built to match the kitchen?
Most Important Things to Know about Real Estate Negotiations:
1- Ultimately, everything is negotiable.
2- You get more flies with honey.