Negotiating the counter offer can actually be quite fun. When the counter happens, an intricate tango takes place between buyer and seller. When you’re going back and forth, a lot of things can be negotiated. Some of them are more commonly known than others. However, they can all be used to save you money in the end. Here are some of the most common negotiation points.
One of the most important things you can do when buying any home is to get an inspection. This gives you some idea of any repair work that may need to be done on the home either now or down the line.
You can use the inspection as a negotiation tactic. You either have the seller make any necessary repairs before the sale goes through, or you have them take money off the sale price. This gives you the budget to complete repairs later on your own time.
Seller concessions are closing costs that the seller agrees to pay for the buyer. A seller might pay concessions so that a buyer will agree to a higher purchase price. In this situation, a buyer has effectively rolled the closing costs into the life of the loan so they don’t have to pay them all up front.
A seller may also agree to concessions in order to sell the property faster. If a house has been on the market for a while, you might find that the other party is more open to bargaining.
Seller concessions are limited to a certain percentage of the loan amount. The exact percentage depends on the type of loan you’re getting and whether it’s a primary, secondary or investment home. Seller concession policies on VA loans are a little more generous.
In any case, there are a number of seller concessions for which you can negotiate.
Mortgage Discount Points
Mortgage discount points are prepaid interest purchased at closing by the buyer in exchange for a lower rate. One point is equal to 1% of the loan amount. However, you can agree to have the seller pay for some or all of the points.
What’s really cool about discount points, though is that they’re tax deductible just like any other mortgage interest. Even if the seller doesn’t pay the points, you could end up winning either way.
The seller can concede any taxes that were prepaid beyond the sale date. Ordinarily, the buyer would be responsible for paying them back.
Miscellaneous Loan Items
There are certain costs that are fairly standard when it comes to getting a mortgage.
One is the appraisal, which determines the fair market value of the home being purchased. There’s an origination fee, which is the cost of setting up the loan. And you also have the cost of getting title insurance on the deed. You can negotiate to have the seller pay for some or all of these.
The seller can also elect to give you certain freebies by lowering the sale price. Why would they do this? Let’s go through some quick examples.
Let’s say you’re buying a house from Sean. You and Sean are both big baseball fans. He has a baseball glove chair with a matching baseball ottoman that he loves. Unfortunately for Sean, his wife despises it. Like any good hitter whose team is down by a run in the bottom of the ninth, he stands in there and takes one for the team.
Rather than pay for the chair to languish in storage, he throws the chair in to sweeten the deal.
Interior Decorating Allowance
Sean also has a game room that’s made to look like a miniature replica of the home of America’s favorite baseball team – the Detroit Tigers (wink). Unfortunately, your wife doesn’t share your excitement about putting your newborn daughter’s crib on the pitcher’s mound.
Because this room will need major work to be converted into a nursery, Sean lowers the sale price so you can hire an interior decorator to come in and consult.
Big baseball fans like you and Sean have lots of memorabilia. You may have conceded on the game room, but your wife let you keep all your junk. Now I have to move it all. I can negotiate with Sean to lower the home’s sale price to cover some of the moving cost.
When it comes to the offer process, what have you been able to negotiate? Let us know in the comments.
If so, subscribe now for tips on home, money, and life delivered straight to your inbox.