When it comes to buying a house, there are many things that you, as a Buyer, and the Seller can negotiate on. How much you can negotiate depends largely on the market condition, other buyers competing for the same property, and the Seller willingness to sell the house. Here are 6 things you can negotiate when buying a house.
Disclosure: Information provided below are strictly from my experience as a Realtor in Virginia and Maryland, other areas may be different (so talk to your Realtor).
1. Sales Price
The most obvious one is the Sales Price. The Seller list the house for sale as a price (i.e., List Price, or Asking Price). You, or your Realtor, will determine the fair market value of the house based on comparable sales in the area. Then it is your job to decide how much you want to offer the Seller, e.g., offer more if the market or competition is not in your favor and less if conditions are in your favor.
2. Seller’s Subsidy
When you buy a house, your Closing Costs will be roughly 3% of the Purchase Price and you can ask the Seller to provide you with a credit up to 3% for a Primary Residence and 2% for an Investment Property (some loans do allow more than 3% Seller’s Subsidy — ask your Loan Officer about this).
3. Closing Date
Most Seller will want you to close as soon as possible, but you should always ask because some Seller prefers a later closing date. Typically, a real estate transaction will close in 30-45 days, but a later closing date might be desirable for you for several reasons, e.g.,
- You lease still has not expired. In this case a later closing date could save you some money by not having to pay for both your rental and your new home.
- You want to delay your first payment. You don’t have to pay your first mortgage payment the first month. For example, if you close any time in June, your first payment doesn’t start until August. So you could delay your payment by closing in early July (and therefore doesn’t have to make your first payment until September).
4. Inspection and Repairs
There are several things you can do with inspection and repairs; and your specific situation will dictate which choice is best or available to you:
- No Inspection – Some auction sales do not allow the Buyer to do home inspection, and the Buyer also has an option to do no inspection. As a Realtor, I do not recommend this…ever.
- Pre-Inspection with No Repairs – In a very competitive situation, you might have to do your home inspection before putting in your offer. This does happen occasionally if the market is very hot.
- Inspection with No Repairs (As-Is Sale) – This is a practical option when the market is very competitive. Buyers that accepts the house as-is will have advantage over Buyers that want to negotiate for repairs. Also, this is typically the most a Buyer can ask for when purchasing an REO (Real Estate Owned), Short Sales, and As-Is Sales.
- Inspection with Repairs – This is the standard option with the market is neutral or favoring Buyers. You can do your inspection after the contract is accepted and go back to the Seller to negotiate for repairs, a lower Sales Price, or more Seller’s Subsidy.
In addition to the standard home inspection, you might consider doing other inspections such as Roof Inspection, Chimney Inspection, Foundation Inspection, Radon Testing, etc. to give you greater peace of mind and negotiating power if the market is in your favor.
Besides home inspection, the two most common contingencies are Appraisal Contingency and Financing Contingency. Normally, the only point to negotiate is how long the Buyer has to remove these contingencies. However, in a strong Seller’s market, the Buyer could be asked to remove the Appraisal Contingency (not recommended) or be willing to pay up to some amount if the appraisal comes in below the sales price, for example, the Buyer might agree to pay up to $5,000 to cover the difference in appraised value and sales price.
6. Home Warranty
In Virginia and Maryland, the Buyer can ask the Seller to pay a reasonable amount toward a Home Warranty plan, for example, $500-750 is a typical amount. A Home Warranty is provided by a third-party company that protects the Buyer when something breaks, e.g., appliances, plumbing, HVAC, hot water heater, etc. Coverage period is typically 1 year and the Buyer only pays trade fee (typically $75-$100) for each repair.
7. Pre and Post Settlement Occupancy
Depending on the Closing Date and the party involved, the Buyer and Seller could negotiate Occupancy Date that is independent of the Closing Date. For example:
- Pre-Settlement Occupancy. If you as the Buyer have to move into the house before the Closing Date, you could negotiate for a Pre-Settlement Occupancy. However, this is very uncommon since it is very risky for the Seller.
- Post-Settlement Occupancy (or “Rent Back). This is a more common of the two where the Seller negotiate with the Buyer to stay in the house after the Closing Date (essentially becoming a Tenant). This is typically done to allow the Seller to find a new place to live. Lenders will typically allow up to a maximum of 60 days and the parties can negotiate on the amount of rent and deposit that the Seller will pay for the rent back.
8. Allowance for Non-Inspection Repairs
Besides inspection repairs, you might be able to make an offer subject to certain condition being met. For example, if the carpet or the paint is in really bad shape, you might be able to negotiate upfront with the Seller to install new carpet or repaint the property.
In Virginia and Maryland, appliances general convey with the property (this might not be true in all jurisdictions). However, new construction homes and flipped homes generally do not come with a Washer and Dryer. Depending on the situation, you could ask the Seller to pay for and install the missing appliances before closing.
In Virginia, home builders often put in their contract for the Buyer to pay taxes that otherwise would be paid by the Seller in a standard transaction. In Maryland, certain taxes are negotiable and can be paid all by the Seller, all by the Buyer, or split as agreed.
Depending on the situation, you could look into taxes for additional items to negotiate.
If you are careful to consider what you can negotiate for, it is possible that you will be able to lower the overall costs associated with buying a home, saving you money and letting you use that extra breathing space in your budget for other things.
Pinyo is the owner of Moolanomy Personal Finance and a Realtor® licensed in Virginia and Maryland. Over the past 20 years, Pinyo has enjoyed a diverse career as an investor, entrepreneur, business executive, educator, financial literacy author, and Realtor®.