When you finally find the house of your dreams and you’re on cloud-freaking-nine over it – you write up a contract with your realtor. My advice: come up with a price that is fair. A lot of folks say to “low-ball” a house and personally - I think it’s a dumb idea. If you offer a fair price for it (take into consideration the upgrades, neighborhood and research to find out what the seller paid for it and when) it will take less time to negotiate. That doesn’t mean accept their asking price. It means, if a there is a GORGEOUS house that you love in a great neighborhood, with lots of upgrades, that hasn’t been on the market long and they’re asking $100,000 for it – you don’t offer $65,000. You’d be surprised how insulted people get when you “low-ball” them too much. It’s not pretty. Generally the seller will expect to lose about 10% off of their asking price. On that house I’d start my offer with $78,000 and work up to $85,000. However, while coming up with a fair price – keep in mind that you will probably end up negotiating up. Leave yourself some room to increase your offer if you need to. Or – you can always take the approach of “This is my one and only offer – take it or leave it” depending on how long that house has been on the market – it might work.
You’ll probably have to put some money down (called a “good faith” payment) which is put into an ESCROW acount and held for you until closing. As my realtor put it – it’s having some skin in the game – it lets the seller know you’re serious. At that point you decide the dollar amount you’re willing to be responsible for as far as repairs go ($1,000 cumulative is normal) after you take posession of the house. Anything more than that you can negotiate with the seller to either take care of the problem or reduce the price. Also make sure you put contingencies in there to protect you.
That “good faith” payment I mentioned earlier? Yeah, if you back out of the deal for a reason other than something listed in your contingencies – the seller can claim it. That would suck. Some contingencies are built into the contract already (like financing and the inspection coming back to your liking). If you have to add anything else in there (like recieving assitance from a grant, money from your folks, or even to be able to close by a certain day) ADD IT – otherwise you could end up losing your money. Always make sure you’re covered. The seller probably won’t like it, but that’s just their tough luck.
After your contract is written up your agent will send it off to the seller’s agent and unless you’re husband is a lucky leprechaun (like mine) they will come back with a counter offer. At this point you’ll go back and forth until you come to an agreement. At some point you may end up negotiating items in the house (typically appliances). My suggestion – if they listed it as being sold with the house in the listing, it shouldn’t be up for negotiation.
Eventually you and the seller will (or won’t) come to an agreement. Sometimes to speed things along you can have your offer “expire” within a certain amount of time (usually 48 hours). This is helpful to get the ball rolling and keep it so they (the seller or even the seller’s realtor) don’t blow you off. Sellers will sometimes wait you out in hopes that you end up turning into a nervous ball of paranoia and offer more money in order to hear a response from them. DON’T DO IT. If someone is selling their home they want it sold yesterday. If they are using delay tactics then they are looking for more money. Make sure you let your realtor know that you’re not in a huge hurry and that you are still willing to look at other houses in case this one falls through for whatever reason. Chances are your realtor will let the seller’s realtor know that you’re planning on looking at other houses (or they’ll fib and say you have another house in mind) which could also make the deal move quicker. I know I said to always be honest (and you should), but if there is another house out there you should let your agent know.
In our case we had two houses we really liked. Both were in good neighborhoods – but one was $15,000 more than the other. The more expensive house was (originally) our first choice. When we looked at the less expensive house we found out (as we were leaving) that the more expensive house had an offer on it that was what our offer was going to be. Not wanting to fight with someone else over a house and spend more than we wanted to – we decided to go with the less expensive house. After we put an offer on the less expensive house we found out the deal on the more expensive house was falling through. We decided that if the seller on the less expensive house didn’t accept our intial offer we would use that time to pursue the more expensive house (since our offer would be accepted) and eventually go that route instead.
Of course – we told all of this to our realtor.
My guess is that she told the seller’s realtor “Amy and Garry are planning on looking into another house if your client doesn’t accept their initial offer.” Within a day the seller accepted our initial offer.
We didn’t play a dirty game – we honestly did what we felt was in our best interest. We didn’t tell our realtor to divulge our little plan (we honestly don’t know if she did – but that is my guess). There were two houses that we loved and would’ve been happy with and we (ultimately) let fate decide which one we would go with. If the seller on the less expensive house counter-offered we would’ve invstigated the more expensive house more and probably put in an offer that would’ve been accepted immediately as that house was on the market for a while and was an estate sale.
Sometimes it’s good to have a few options out there, if not to use for negotiating purposes, but for incase something happens further down the road… and believe me… things do happen