One way to look at a negotiation to purchase a home is that if everyone on the other side is angry at the settlement table, then you must have won – but that is a really rough way to conduct a real estate transaction! Here is what I tell my clients who are looking for a home to buy in Bethesda or Chevy Chase. When you find that dream home, do not count on it being a buyers’ market. If that Bethesda home for sale is nice enough for you to want to buy it, then chances are there is another Bethesda home buyer thinking of making an offer too! So how do you come out on top?
You need to make a strong offer to buy that Bethesda condo or home in Edgemoor. A strong offer is one that sellers will take seriously. Your offer must show that you mean business and provides benefits for both parties. You want to get the best possible deal on a property you’ve selected, so make a strong offer which is either likely to be accepted or will motivate the seller to open negotiations.
An offer is composed of two components-price and terms (closing date, home inspections, financing contingencies, etc). You need to focus on which of the two parts is most important to you. Be willing to give on things that are not important to you. For instance, if you do not have to be in the house until school starts in January, then let the sellers remain in the townhouse in Kenwood Forest through the holidays and schedule settlement for the end of December rather than December 15. If you are coming in low on price, then consider offering to take the house “as is” subject to a home inspection with no negotiation. Trying to make both price and terms advantageous to yourself will likely offend the seller and make them less likely to negotiate.
To make a strong offer include the following:
– Make a 3-5% earnest money deposit. The size of the earnest money deposit is a good indication of your commitment to the purchase and your financial strength. The owner of that wonderful Bethesda home for sale is taking a risk when she take the home off the market. A higher earnest money deposit reduces the risk to the seller that the buyer will walk away from the transaction.
– Include a lender letter stating that you have been pre-approved or approved for a loan. A pre-approval letter is essential. Without it, your offer may be rejected outright. If you are paying cash, then be sure to provide proof of funds – such as a bank statement showing that the funds are fully available. Be sure to black out your account number. You also might include a letter from your banker stating that you have the requisite funds available.
– Has a balance between asking for and giving concessions. A strong offer may propose a lower purchase price and balance it with concessions on terms such as a quick closing date (10 days) and accepting the property “as is” without any warranty or repairs.
On the other hand, if the buyer is cash poor and needs (1) the house to be in perfect condition and(2) help with closing costs, then the buyer can strengthen their offer by giving the seller full asking price with closing costs added on top – subject of course to an appraisal!
A spirit of win win is important – there should be an incentive for both sides in every offer and counter offer.