Tips to Buy the House You Need

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You have decided now is the time to buy a house. You have the down payment saved, you can afford the mortgage payment, and you are planning to settle in for the foreseeable future… based on my previous article on buying a house now or saving for a bigger one later, I have a new article here with tips to buy the house you really need.

The starting points are to decide what you actually need and how much you can afford. The next steps are to find that home and negotiate the best price:

How much house you need?

Your needs are dictated by your lifestyle and who will be living with you. The size and features of the property, its location, and the condition of the property are important parts of this discussion. How many bedrooms are required? Does it have to a house; or, is a townhouse or condo suitable? Is a fenced yard or double garage needed? Does the home have to be in the city or is a suburban location preferred? Is it located near to work or the children’s school? Does the home have to be move-in ready or is it okay to need some updating? These are the questions that you should answer (maybe put them down on a piece of paper) before starting your search.

Pro tip: Set your expectations higher and set a minimum you would settle with. Sometimes you might be able to find something that’s better than your minimum needs, and that’s a win!

Get Pre-Qualified

It is best to get pre-qualified so that your mortgage application is accepted after agreeing to purchase a home. The loans officer at the bank will look at your finances and determine what the maximum amount will be loaned to you. Once you have this number, don’t reveal it to anyone. This is your primary negotiating advantage.

Work With a Licensed Realtor

Realtors have access to the greatest number of house listings. They also have access to comp’s; these are the sale prices of comparable homes, a necessity to accurately determine the home’s fair market value.

The realtor needs to know what your needs are, type of housing, features, size, and location. He will also ask about the price range. Be evasive, use rounded numbers but don’t reveal what you were pre-qualified for. If you were pre-qualified for $280,000, you would say, “I am comfortable with $250,000 maximum. I might be able to stretch it a bit for something really special.” This is all part of the negotiating strategy.

Lowest Price is not always Best Value

The realtor will develop a list of properties he thinks might interest you. He will also compile a list of comp’s to show what $250,000 will buy. After viewing some properties in the $250,000 range, ask to see what is available at $270,000. You may be surprised at how going to next level improves the quality of home.

Once you have decided to make an offer on a property, look at the comp’s and compare prices and features with the home you are looking at. There might be a condo in the same building with an identical floor plan that sold two weeks ago. This would be an excellent comp. Now suppose that comparable condo had a city view but your condo has a view of the back lane. You will need to put a price on the view and use that to negotiate the price down. Updates in the condo, which floor is it on, the type of flooring and fixtures will all affect the sale price. Houses are not as easy to find good comp’s, but using comp’s and making adjustments for differing features and conditions will help determine fair market value.

Negotiating Techniques

Home prices are not set, rather they are a reflection of what buyers will pay, and what sellers will accept. This is what negotiating is all about, the buyer makes an offer to purchase; the seller can accept the offer, make a counter-offer or ignore the offer completely. It is like poker where you never reveal what you are truly prepared to pay.

Are the Sellers Motivated?

It is important to know how motivated the sellers are. The quickest and most public way is to see how long the home has been listed. If it has only been listed for one week, chances are the sellers can afford to wait, but if the home has been listed for 180 days, they might be open to any offer presented. Sometimes the realtor will reveal something personal about the sellers; they are going through a divorce, the house is about to be foreclosed on, they are being transferred to another city. Motivated sellers mean more opportunity to negotiate better terms.

An offer is not only about price, it also includes closing dates, possession dates, items to be included in the sale. A house in a golf course community might have a golf cart in the garage that can be included in the sale – you may not golf, but the cart might be sold later for $2,000. There might be some custom patio furniture on the deck, a ride-on lawn mower or formal dining room table. These could eliminate the need to buy extras later on.

Closing costs are another common request. The seller is going to lawyer / notary to remove their name from liens or encumbrances anyways so it is not unreasonable to ask for those costs to be covered by the seller.

Possession dates are negotiable and can be used to lower the price. If the home is empty, or the sellers are in the process of moving, you can offer to move in quickly for a reduced price. 90 day possessions are normal, but if you can take possession in 30 days, that will save the seller two months of mortgage payments and bills.

Is the mortgage assumable? If it is, and it fits within your means to assume it, this is another opportunity to ask for a lower price. Pre-payment of mortgages normally incurs a penalty equal to three months interest. An offer that includes assuming the mortgage will save the seller upwards of $2,000 in penalties – depending on the principal amount and interest rate.

Price reductions can legitimately be asked for if updating or repairs are needed. Fair market value of the home is determined as an after repair value. In order to bring the home’s condition to that level may need money being spent; and it is appropriate to ask for a price reduction equal to the cost of repairs. Even if you are prepared to correct the item yourself, be sure to use a number as if an outside contractor were being hired.

The best kept secret phrase to use in any negotiating, whether you are buying a home, a car, a horse or whatever, “I like yours better, but this other one makes more sense.” “I like the charm of your Victorian era house, but the mid-century modern makes more sense to me.” You don’t have to give specifics, just use the phrase to your realtor and ask him to pass those sentiments onto the sellers through their agent. It shows your interest but not at that price. If the sellers are motivated to sell, they will come back with some sort of counter offer.

A couple of other phrases that can be used, “I really like your house, but this is all I can afford,” and “My best offer, firm and final.” As with any negotiating, be willing to walk if you don’t receive the terms you want.

Closing

Buying the house you need is about identifying your needs, finding the house that meets your needs, and negotiating the best terms. Negotiating the purchase is more than price, be sure to include other items to add value to your purchase. There are key phrases that can be used to great effect when negotiating terms of the purchase.

7 COMMENTS

    • I agree with Nick’s comment: price can be a deceivingly attractive driver. Think of total cost of ownership, rather than purchase price. Value must be established when thinking of costs holistically.

    • Exactly, guys! In my house hunting adventures I was always ruled by some “hot deals” but fortunately I had already decided not to hurry things, and after I spent a day or two considering the options I realized that those bargains were nothing that black holes for money.

  1. How do you find country houses for sale in Romania? All the agents I find online are based in cities or in Transylvania. I am interested in Maramures area, but can not find anyone selling houses there on the whole internet!!!! Can you help?

    • It is indeed tricky to find listings in villages. Did you perform searches on OLX.ro? That’s the biggest portal in the country and definitely a good place to start.

      However, most people living in villages don’t use the internet, so the easiest bet would unfortunately be to pick your village (or villages) and just drive to them, then ask there about houses for sale – maybe at the city hall, but anybody would know. Unfortunately, chances are slim that many people would actually speak any English there, so you’d be better taking with you somebody who speaks Romanian. I would suggest OLX – it’s a good place to start, although being there in person and word of mouth is unfortunately the only way of finding about all deals available.

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