Seller concessions and buyer bargains - What to ask for in the current real estate market.
By Xin Lu 6 comments
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for sale by owner It is currently a buyer's market for real estate in most of the United States and there are many ways a buyer could negotiate for a deal beyond getting a great price. Here are some of the concessions sellers are willing to make and some ideas for buyers at the negotiations table.
1. Closing costs - Lately I have seen many real estate listings in California that say the seller would pay for the closing costs or the seller would pay a set amount towards the closing costs. Closing costs could add up to thousands of dollars depending on the size and type of loan a buyer acquires. This means that if a seller pitches in then a buyer would not need as much money to procure a loan.
2. Tax assessments - Many transactions in troubled real estate markets are currently foreclosures. Some of these properties have back taxes and usually the buyer is supposed to deal with this, but it is possible to negotiate with the bank or seller and have them pay for the taxes before the sale completes.
3. Home owner association fees - Here in San Mateo county the typical home owner association fee for a townhouse or condo is $300 to $500 a month so getting the seller to pay for one year of the fees is a $3000 to $6000 perk. Many new developments in the Bay Area are paying the fees for a year in order to move units, but some builders have given out deals where three years of HOA dues were paid. It is also possible to ask for an individual seller to pay the fees for a set amount of time as part of the deal.
4. Repairs and upgrades - Instead of buying a fixer upper, it is possible to ask sellers to do certain repairs and upgrades before the deal is complete. In new developments it is now common to receive upgrades to appliances, flooring, and other custom features.
5. Miscellaneous goods - In an article by CNN a buyer was able to score $800 worth of heating oil in addition to a price discount, and some sellers are throwing in other incentives such as cars and vacations. Indeed, this home seller in San Mateo is throwing in a free vacation to Maui if you buy the incredibly expensive home. In this case, the vacation is really a marketing tool and not a real discount since the home is quite overpriced.
All of these things can be negotiated in any real estate transaction, but in the current market it is more likely for the seller to agree to terms that are more in favor of the buyer. So if you are buying a home now you should keep in mind that it never hurts to ask for a discount, and there are many ways to receive the discount you want. You should also be aware of the difference of a true seller concession and a marketing gimmick because getting a vacation worth $5000 on a home that is $300k overpriced is not a good deal at all. Finally, you should get whatever terms you settle on in writing and make sure that the sellers follow through.
What discounts or perks have you gotten in recent real estate transactions? Feel free to share!
Tagged: Personal Finance, General Tips, Real Estate and Housing, haggling, money, negotiating, real estate
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While looking for a condo to buy, we recently came across an offer, where seller had paid the lender some money to bring the rate of interest down. The rate of interest was so attractive when compared to the going market rate that it alone tipped the balance heavily in favor of that condo. Although the deal didn't get through for other reasons, this is a big perk to look for, the difference between our monthly mortgage payments was dramatic because of the interest rates.
Two points:
First, it's a buyers market largely because most would be buyers can't get financing. One can argue that it isn't a real buyers market. It is a lack of qualified buyers, that make it a buyers market for the few remaining financially ready buyers. Consideration and cooperation between buyer and seller is a better idea.
Second, a house is generally a long term investment. If you plan on living in the house, the buyer should exercise restraint. A smart buyer doesn't want the seller bad mouthing the buyer to the neighbors, or friends still in the area. A dream home isn't, with suspicious or hostile neighbors. Again, consideration and cooperation will be a better long term move.
Hi learning the ropes, the interest buy down is a part of closing costs. You can negotiate a loan with interest buy down if the seller is willing to pay for the cost to buy it down.
It is true that it is harder to get financing currently, but a buyer with a big enough downpayment , good credit, and good income can still get a loan. The fact is just that banks are getting more sane about their risks and going back to the lending criteria of prior decades. People were able to buy homes back then because they saved more, and people can still buy homes now if they save more.
As to guest's comments, I don't understand why a seller would badmouth a buyer for asking for discounts. It is common sense to do so.
I've seen reports of home builders selling an upscale home (4000 sqft) at regular price but giving a smaller home (1500 sqft) away for free. I'm sure there are tons of concessions, but if you play your cards right, you can certainly clean up.
Funny you should mention that Matt, I wrote about that freebie in this post .
Xin Li - you reside in an upscale area of CA as I do. Areas that were very much part of what I refer to as the 'False Housing Spike'. The 'False Spike' was brought about by artificially cheap money. Prices will undoubtedly fall harder in those areas that had seen the fastest price appreciation in the last few years.
We're seeing it happen right before our eyes here in San Diego.
I see at least a couple more years of pain - if not a few years. I'm presently renting but would love to buy my own place and expect to start looking in a year or two depending on market conditions.
When I do locate properties I like, I will be throwing 'stink bids' at it. That is a bid so low, so underneath the asking price, that even I don't expect to have it accepted.
It won't be a buyers market but, as a previous commentator said, a qualified buyers market. And there will be precious few of those and many, many distressed sellers.