Housing Scene: Home purchase negotiations shouldn’t end at price
By Lew Sichelman
May 16, 2010
Reporting from Washington
Buyers and sellers who haggle over price alone could be leaving a lot on the table.
The purchase price is only one part of the transaction. Everything in a real-estate deal is open to negotiation, and sometimes price isn’t the most important factor.
A buyer might be willing to pay a little more to move into the house within 30 days, for example, instead of waiting until the seller finds another place to live. Similarly, a seller might take less if he could stay longer.
Which appliances stay with the house can sometimes be a sticking point that makes or breaks a deal. Whether or not the seller will help pay the buyer’s closing costs is another. If the seller provides a so-called “warranty” is another.
Here are some of the bargaining points each side should consider:
• Earnest money. Buyers are usually asked to attach a check to an offer. But such a deposit also can be used to compensate the seller if the purchaser withdraws from the deal without a legally suitable reason.
Consequently, the seller should seek as large a deposit as possible. It may provide some bargaining room later if you need it. And besides, you can always go lower if a good offer presents itself.
If the closing is set far into the future — say, anywhere from three to six months — you might want to demand an even larger deposit because your home will, in effect, be off the market for that prolonged period.
Buyers, on the other hand, want to be certain the full return of the deposit is tied to contingencies in the contract.
• Financing. Unless they are for all cash, almost all offers are predicated upon the buyer’s ability to secure funding. But the seller should be certain the financing contingency is based on reasonable economic conditions.
A financing clause is usually in two parts: 1) that the buyer secures funding within a certain number of days and 2) that the mortgage rate will be no more than a certain percentage. In each instance, your agent should be able to advise you about what is reasonable for current economic conditions.
But seller beware: Make sure that the buyer applies for a mortgage right away so that if he can’t qualify, the house can be put back on the market without too much time being lost. Consequently, the timing portion of this condition shouldn’t be too long, certainly no longer than a few weeks at the most.
Also, if the rate portion of this contingency is set too low, the house might be under contract but the contract may be all but worthless because there’s no way any buyer will find a rate that far below the market.
If the offer is for cash, the buyer may want to seek a somewhat lower price because the sale is all but guaranteed to go through.
• Backups. Even though a seller has accepted an offer, he should entertain others as backup contracts in case the first one goes sour. But to give yourself the opportunity to select the next-best offer, or hunt for even better offers, don’t accept other contracts in any particular order.
• Inspections. As a marketing tool, sellers sometimes hire an independent third-party inspector to give their homes a clean bill of health. But it is usually the buyer who wants the house looked over from top to bottom. That way, if the water heater is on its deathbed or the heat exchanger is cracked, they can use the inspector’s findings to renegotiate.
Also, just in case the findings are not to his liking, the buyer will want his deposit returned promptly and in full.
At the same time, the seller should require that the inspection be done promptly so the property is not put in limbo.
• Closing costs. Sellers often pay part — and sometimes all — of their buyers’ escrow fees, things like a title search, termite inspection, survey and the like. The exact amount or percentage is usually dictated by local custom. But it’s all open to negotiation.
• Fixtures. Items such as wall-to-wall carpeting, window treatments and ranges are not part of the structure. But they are attached to it so they are generally considered to be fixtures that convey with the property. But these and plenty of other items can be key bargaining tools. And whatever you agree on, make sure it is spelled out clearly in the contract.
The seller will want to list what does not convey with title as “not included in the sale,” and the buyer will want to list everything that stays with the property.