For most of us, a home is the most expensive single asset we’ll ever purchase. Because home purchases are usually financed, purchase price differences can sometimes be hidden in what appears to be a minimal increased monthly note. But when it comes time to sell your home, having an additional 5%, 10% or more in equity translates into big money in your pocket. The best time to get that equity: when negotiating the purchase. Here are five of Athena’s best negotiation tactics for buying a home.
- Find out how much the seller paid for the home and the balance owed on a note.
Regardless of the market forces that may have affected the value of a house after the seller purchased it, the seller is likely convinced that the house is worth more — probably a good bit more — than the price he or she paid. The seller’s “bottom line” is driven by how much he or she “clears” after paying the balance on a mortgage note, commission, and closing costs. These factors — the seller’s purchase price and the mortgage note balance — will likely drive his or her flexibility in purchase-price negotiations. Before you invest a lot of time negotiating, learn what drives the seller’s decision-making process.
Your realtor should be able to provide you with the last purchase price of the home, particularly if the seller bought it through an agent. Otherwise, in most parishes in Louisiana, purchase-price information is published on the tax assessor’s website. The Orleans Parish tax assessor, for instance, offers a public database that lists the purchase price of houses, the names of current owners, and property tax information.
In contrast, the balance on a mortgage note is generally not public information. However, with a little detective work, you can usually “guesstimate” with fair accuracy.
If the seller took out a loan to purchase his or her house, the lender filed a mortgage in the public records. Ordinarily, this mortgage states the exact amount of the loan and includes a copy of the note, which states the interest rate. With this information — assuming regular payments — you can calculate the current balance.
But how do you get a copy of the mortgage papers? There is always the old-fashioned way: go to the Clerk of Court’s office in the parish in which the house is located and ask to see the records for the property (using its municipal address).
If you’re not inclined to spend a few hours sifting through public records, note that most clerks of court make their conveyance and mortgage records available online. To access the records, you will need to pay for an account, as well as for each page you want to print. If you are friends with an attorney, consider asking him or her to access the records for you.
- Find out why the seller is selling.
Any particular reason for selling can substantially drive how much of a “haircut” the seller is willing to accept off the listing price. A couple going through a divorce, for instance, likely has to sell quickly to avoid redundant housing expenses. On the other hand, an “empty nester” looking to downgrade may have little incentive to sell quickly (and may, in fact, resist selling the family home that invokes fond memories). Knowing why a seller wants or needs to sell can be invaluable in your purchase-price negotiations.
But how do you find out what drives the seller? In many situations, if you (or your agent) ask, the seller’s agent will tell you. A “broker’s open” is often a good opportunity for your agent to chat casually with the seller’s agent and conduct subtle fact-finding.
Otherwise, investigate online. A seller’s social media page often leaves “clues” as to his or her reasons for selling. Was there a recent death in the family? Is the seller moving for a new job? Did the seller have a new baby, necessitating a bigger pad? Learning the seller’s motivations — and potential time pressures — can help an informed buyer gauge how hard to push for a rock-bottom purchase price.
- Search for properties with multiple listing-price reductions.
Reducing a listing price several times — especially in rapid succession — is often a sign the seller is motivated to sell. To get the best deal, look for properties with multiple listing-price reductions. Also, agents for sellers willing to negotiate for a substantial “discount” on the listing price often leave clues for buyer agents in the listing of the property. A seller’s agent might remark, for instance, that the seller is “motivated” or that a buyer should “make an offer.” Unfortunately, these remarks are usually made only in the “agent remarks” section of the Multiple Listing Service, so you will have to ask your agent to specifically look for them.
- Don’t get into bidding wars. Just don’t.
When a seller aggressively prices an attractive property, buyers often get into a “multiple-offer” situation. When that happens, the seller’s agent frequently calls for the buyers’ “highest and best” offers. The seller then accepts the highest offer made, without countering.
Under these circumstances, buyers often adopt an auction mentality, wanting to “beat out” the competition. Because the property is viewed as “hot,” buyers are in danger of overvaluing it in their desire to win the auction. In our experience, multiple-offer situations often result in an overzealous buyer overpaying for the property. Don’t get into bidding wars.
- Negotiate in stages.
Any real estate transaction presents the opportunity to negotiate in multiple stages. Of course, the first stage involves offers and counteroffers for the purchase price. After that, property inspections may reveal defects in the property that allow for further negotiations and a purchase-price reduction. Likewise, if the property doesn’t appraise for the contract value, the seller would be hard-pressed not to reduce the price in accordance with the appraisal. Take advantage of such opportunities.
If you’d like to learn more about these and other strategies Athena’s highly trained agents use in representing buyers and sellers, give us a call or shoot us an email. We’d love to work with you.