Buyers & Sellers: PART 2- What an experienced Realtor© wants you to know. Offer terms and negotiations to consider.

We start part 2 of the series with the psychology behind negotiations on homes going to highest and best. Low interest rates, the demand for better, bigger housing in the outer-lying areas of New York City has created a very strong sellers market. You need a strong Realtor© with negotiation knowledge and whom you trust, to get you the home you want, over all other buyers.

Buyers look at homes in terms of what they can afford, wanting the best deal. Sellers are really looking at their net at the close of the sale, that’s going to be the highest number they can get. These two worlds have to meet in the middle and your best bet as buyer and seller is to have your own experienced Realtor© be able to do this for you, because that’s what they do for a living. Both sides have the vested 200% fiduciary responsibility to their client, the buyer on one side and the seller on the other. Here’s what I take into consideration when starting the negotiation:

 

  1. Asking Price

As a professional Realtor© I know sales prices in areas all over Northern New Jersey, because I live here and it’s my job to know. I know when something is priced at market, under market and over market value. Asking price is very rarely the ultimate sales price. It will either go above, if priced at or under market value, or go below, if priced above market value. The bottom line is Zillow, Realtor.com, Trulia, DO NOT HAVE ACTUAL AND ACCURATE MARKET DATA, the Multiple Listing Service we, as members of the specific Boards of Realtors© in those areas HAVE THE ACTUAL AND ACCURATE MARKET DATA. We can go back and see what has sold in the past year, 6 months and even 3 months for the most up to date stats. LISTEN TO YOUR REALTOR© they do this for a living and can guide you as to what the trend is in that neighborhood in terms of pricing. When I get asked “It’s listed at $799,000, should we would go in at $650,000”, and I, as a professional, know that it’s worth the value, my question back to my buyers is, “How much do you really want this house?”. Coming in lower than asking for a home that is most likely worth $850,000 but is obviously priced to sell quickly, will NOT get you that home, it will make your offer to the selling agent seem like you are not serious and that I, as your representative, did not do my job to educate you on this specific market. Be realistic and don’t try to negotiate things by what you’ve seen on Zillow. If you truly cannot afford to buy a home for more than your preapproved $800,000 then we should not be looking in that price point. I always ask what your minimum and maximum budget is according to your lender because we need to take things into consideration like taxes, which can vary greatly throughout New Jersey, Bergen and Essex Counties can sometimes have homes with taxes over $20,000 per year and considering only $10,000 of that can be currently tax deductible, it can change your financials greatly if your home budget, like Linda’s was $1,200,000.00 You are basically adding that tax as additional fees a buyer incurs quarterly to their mortgage.

 

  1. Closing costs

As a buyer, aside from your down payment, there are closing costs, like attorney fees, title insurance etc that are basically added to your down payment, which you bring with you to closing. I always give a rough estimate to buyers of 2-3% of purchase price. With the first deposit of your down payment due shortly after attorney review concludes. In over bidding situations, a sellers concession, which can sometimes help with closing costs, is out the window. The reason being, there will be stronger offers on the table that will not be needing the seller to help with anything, so be prepared. There are options for buyers on homes that need work, like 203K home reno loans. I work with many lenders that help buyers obtain these and in those instances for lower down payment buyers, in homes that need the work, we can see these being accepted. A seller may not be interested in doing any repairs or renovations and therefore don’t mind paying into the buyers closing costs to make the deal happen.

 

  1. Closing date

This is something I discuss before submitting an offer on any property with the sellers agent. Does the seller need to move to another home, what’s their timeline, is this sale contingent on them being able to purchase something else? Do they prefer a higher down payment and lower upfront offer or do they want to know a buyer has enough liquidity on the back end to take on any repairs that may come up in an inspection? All of these questions are important to me because it can make the difference in getting an offer accepted.

Buyers competing with all cash offers need to figure out if they can waive the appraisal contingency as well as the inspection contingency.  This (and the legality of the New Jersey Statute of Frauds) is the reason we ask all of our buyers to get preapproved and present their offer in contract form to the seller side with that preapproval, along with Lead Paint Disclosures, COVID disclosures and Sellers Property Disclosures. This lets the seller know, the buyer is ready, willing and able to purchase this property.

 

  1. Home warranty

On new construction homes, there will most likely always be a home warranty added to the sale for a specific time period by the builder. On older homes, I always let buyers know about the PSEG Worry Free Plans (https://nj.pseg.com/worryfree/worryfreeprotectionplans)They cover a host of mechanicals and will keep them maintained as well.

 

  1. Sale-Leaseback

Sometimes the seller has not yet found a new home to purchase or place to live. They may rely on the proceeds from the closing of this home sale to purchase something else. In that case, we work some initial wording into the additional provisions of the offer saying something in reference to buyers flexible on closing or amenable to sale-leaseback. Attorneys can hone this verbiage in for both parties but essentially the seller would turn into the tenant and lease the premises for a specified period of time after the closing occurs at a rate the attorneys would work out. It’s important to note that a sale –leaseback can only occur for 3 months otherwise the lending terms change which looks like mortgage fraud.

 

  1. Home repairs

In the era of seller’s obtaining multiple bids on their homes. Buyers need to understand the true definition of “waiving a home inspection”. I often ask they speak with their attorney for full legal explanation but also because the words sound scary to a buyer relocating from a city coop or condo to a single or multiple family home. I explain it as simple as this: as a buyer you still need to do your due diligence and obtain a home inspection because a sellers disclosure may not always tell the full story of the home or may not be accessible. That report produced from the home inspection will let you know what the interior workings of the home really are from top to bottom. If you are up against many other buyers, some deciding to do away with anything that report details and buy the home in “as-is” condition, you have to be ready to make the offer competitive by doing the same, if that makes you feel comfortable after your conversation with your attorney.

 

  1. Appraisal contingency

Like the inspection contingency stated above, waiving the appraisal is another option that can help a buyer win their offer in the purchase of a home. An example I make is a home is asking $900,000. Multiple offers from buyers have the final sale number at $1,000,000. Comparable sales in the neighborhood from the past 6 months do not have any sales over $900,000. When it comes time for your appraisal from your lender, an appraisal which is an independent opinion of the property value, may not come in at $1,000,000. The buyer needs to understand that when they waive that appraisal, they will need to come up with the money at closing to make up for the difference.

 

  Home purchases and sales are easy with Michelle Mumoli at The Mumoli Group, we do all things real estate. Call us to talk about how we can you help you 917.268.8916