Shopping for Your Home

Monday, December 2, 2013

Everything In Real Estate Is Negotiable

         
Everything In Real Estate Is Negotiable
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Everything -- absolutely everything in Real Estate -- is negotiable.

Recent economic reports indicate that real estate sales are on the increase, especially since mortage interest rates are still very low. But it still is a "buyer’s market".

Home buyers, and especially first timers, do not understand that they have the right to bargain and negotiate all aspects of their real estate purchase.    
Potential buyers should not hesitate to make low offers on a house they are considering to buy. The real estate broker/agent has a duty to submit any offer -- no matter how ridiculously low it may seem -- to the owner of the house.
 
A seller has three options when an offer is received. She can reject it out of hand, can accept it as presented, or she can counter-offer.

If your offer is rejected, you can always present another offer which is closer to the seller's asking price. Or, if price is a concern, you can keep looking for something else.

If the seller counter-offers (which is the usual practice) then you can slowly begin to narrow the difference between the two prices until hopefully you both reach that happy medium.

Once you have a signed contract to purchase, the negotiations should not cease. First, you have to determine what kind of mortgage loan you want. Do you want the security of a fixed 30 year loan, where your monthly payments will remain the same? Do you think you will be selling the house within the next 5-7 years, in which case you may want a 5 year adjustable rate?

Incidentally, I do not recommend a 15 year mortgage. True, the rate will be less than a fixed 30. But your monthly mortgage payments will be higher. With a fixed 30, you have the right - but not the obligation - to make larger monthly payments, as if you had a 15 year loan. And if you need that extra money - or if a better investment comes your way - you can always go back to your regular 30 year payment.

You should shop around and compare mortgage interest rates with a number of mortgage lenders in your area. Presumably the real estate agent will give you a name or two of potential lenders. Certainly you should contact them. But don't stop there. Check out at least five lenders to try to get the best rate for your purchase. Then make your decision.

After you select your lender, once again the negotiations should continue. Your contract should contain a provision that the contract is contingent on your obtaining a satisfactory inspection by a professional home inspector. Typically, there are two kinds of inspection contingencies. One gives you the absolute right to cancel the contract for any reason based on the results of the inspection. The other requires that you provide a list of problem areas to the seller, who has three days in which to agree to all (or some) of the issues. If the seller agrees to your concerns, the contract remains in full force.

I prefer the former approach. From the buyer’s point of view, if there is disatisfaction - or even buyer’s remorse - they have the right to cancel the contract immediately. (Typically, the contingency lasts for 3 or 5 days after the contract is accepted.) From the seller’s point of view, while they may lose a sale, its better to do it now rather than have an unhappy potential buyer who will give you trouble all the way to settlement - and even beyond.

Usually, the real estate agent involved in the transaction will provide you the name of an inspector. But insist that you be given at least two names. This assures you that there is no collusion between the agent and a particular inspector; it also protects the agent from claims that he was not in cahoots with the inspector.

Do not let the broker select a title or escrow company or attorney for you -- at least until you have compared prices with several such settlement providers. Keep in mind that the law is very clear: you - as purchaser - have the absolute right to select who will conduct your real estate closing.

Home owners insurance (hazard) will be required by your mortgage lenders. Once again, shop around. There are many different kinds of insurance coverage, and you should familiarize yourself with the various policies before signing up with a particular company.

No doubt the real estate agent will try to be helpful and will want to walk you quickly through the entire process. After all, the agent wants the deal to close so that the commission will be paid.

But it's your money. And a lot of it. Take your time, shop around, and then make your decision based on all the facts and a lot of negotiation of price and terms.

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