Despite headlines repeating for years that it is a seller’s market, the tide is finally starting to change in the favor of buyers. While it is not a buyer’s market, high mortgage rates have slowed demand, giving buyers some much-needed negotiating power.
Negotiate for a Lower Price
In the past, offering less than full price would have been unwise – now, however, sellers seem more willing to compromise. According to Realtor.com, almost 20% of sellers reduced their prices before selling in November last year. Of course, just because sellers are willing to negotiate doesn’t mean buyers can make lowball offers. Ultimately, how low one decides to go below the asking price depends on the local market and the seller's needs.
One reasonable argument buyers can use to reduce the price is requesting an inspection and then asking for repairs accordingly. Note: inquiring about repairs is not the same as asking for renovations. Ideally, buyers should only ask to fix broken things. And, in the case of more involved projects like a roof repair, be sure to get an estimate beforehand.
Seller Concessions
Seller concessions are another means by which buyers can get a favorable price. Seller concessions, or seller assistance, is when the seller agrees to shoulder some home-buying costs. In these agreements, the seller will pay part of the closing costs. Some examples of seller concessions include home inspection fees, discount points, appraisal, attorney fees, and even homeowner association fees.
Buyers should try ironing out selling concessions, as these can equate to 2% to 5% of the home purchase price. Likewise, eliminating these fees will allow the buyer to save that money for a larger down payment or other costs related to moving and buying the home.
Mortgage Points
The third way buyers can manipulate today’s market is through mortgage points. When someone purchases a home, they must pay interest on their home loan, and the lender will determine the rate based on the buyer’s financial situation. If the buyer has good credit, reliable income, and little debt, their rate will be low. But that isn’t always the case for everyone.
Mortgage points are valuable because they permit the buyer to decrease their interest rate and lock in a lower one during home-buying. These points are essentially discount points on one’s mortgage loan and function as one-time fees buyers pay to decrease the interest rates on their home purchase or refinance. One discount point costs 1% of a buyer’s total home loan amount – therefore, one point of a mortgage of $100,000 will cost $1,000.
Bear in mind that these discounts will vary depending on the lender – nevertheless, those who take advantage of mortgage points can most likely expect to save money, lock in a lower monthly payment, and even save on taxes.
Consult with an Expert
Whether you negotiate for a lower price, establish seller concessions, or take advantage of mortgage points, buyers must seek assistance from their real estate agent. The current market favors sellers, and you will need all the extra knowledge you can get to be successful. NMC Realty – currently operating in Orange County, CA, and Austin, TX – can provide the expert advice you need to buy your next home.