Home-buying 101: Know which costs are fixed and which you can haggle
Buying a home is considered one of the top major purchases in adulthood. As more and more Millennials begin to flood the housing market, this type of purchase is accompanied by a lot of unknowns for first-time buyers. Given the current real estate trends, cutting costs wherever possible can make a big difference for cash-strapped young adults. Today, home prices are rising slower than the last two years, yet mortgage interest rates are on the rise. Luckily, there are a few costs in buying a new home you can easily negotiate. Although some of these are lesser-known strategies, they could end up saving you thousands of dollars after the home-buying process is complete.
Cut down closing costs
One of the biggest advantages home buyers have is the ability to negotiate closing costs. These are fees and expenses the buyer and seller have to pay once the transaction is complete. Generally, closing costs can reach anywhere from 2%-5% of the overall price of the home. However, it doesn’t always fall on the buyer to fork over these funds. In many situations, you can get the seller of the home to cover some if not all the closing costs associated with the transaction. This is especially true if your seller is desperate. If the home seller is anxious to close on the property, you can ask for them to cover a portion or all of the closing costs. If the seller has had a difficult time getting the house off the market, this may be a price they’re willing to pay. Another way to negotiate closing costs is via a closing credit. If there are several repairs that need to be made to the home – perhaps an updated sealant on the driveway or the back deck needs refinishing – the home buyer can ask the seller to provide funds for these repairs in the form of credits. It should be noted, though, that some mortgage lenders have restrictions on just how much a seller can credit the buyer at closing. Usually, the credits can fall between 3% and 6% of the overall purchase price. In addition, most lenders do not allow sellers to credit buyers for reoccurring expenses like mortgage payments. Lenders will typically only allow buyers to receive credits for one-time costs. If you do decide to negotiate closing costs or closing credits, make sure to get absolutely everything in writing. This will ensure you’re getting exactly what you negotiate, and nothing can slip through the cracks after all the paperwork has been signed.
Throw in the kitchen sink
Many realtors claim you can negotiate just about anything during the home-buying process. And, in some cases, they’re right. Negotiations during this phase can be made for the initial price of the home, the homeowner’s warranty, and any aesthetic factors the buyers are willing to point out.
First, home buyers can haggle the price of the home by assessing at a few factors. You’ll want to take a look at the comparable properties in the neighborhood, the home’s condition, and the overall market. If the price of the home you’re interested in is higher than the value of the homes in the area, you definitely have some room to haggle with the seller. However, if its lower than the value of other homes, you may be stuck at that price point. Fortunately, there are other ways you can cut down on the cost of buying a home. It’s always important for home buyers to ask for a home warranty during the home-buying process. In most cases, the home seller can pay this expense up front. While the home buyer will be responsible for the deductible for any claim they have made, the home seller would pay for the premium up front. Why is a home warranty important, you may ask? These warranties cover repairs of integral home items like heating and air systems, plumbing, and appliances. These items can get costly to repair, hence the importance of a home warranty.
Home buyers can also save a pretty penny by negotiating cosmetic updates and furnishings in the home. If a specific piece of furniture complements the layout of a room, or if the seller has certain lawn care items to take care of their front and back yards, the buyer can request those items be thrown into the deal for free. This can be a win-win for the buyers and the sellers, as many sellers do not want to transport bigger items to a new home.
There’s also wiggle room when it comes to your move-in date. Some new home buyers may think they need to wait until their current lease is up before closing on a new home. This is not necessarily the case. When looking to buy your desired home, you can request that the seller of the property pay the fee associated with you completing or breaking your current lease. Many sellers will be open to this idea, as they’d rather have the house sold sooner than later. While it may only amount to a few thousand dollars, this will help new home buyers put that money toward more important parts of the new home. When haggling the cost of a new home, don’t be afraid to get creative. There may be thousands of dollars worth of savings you can receive during home-buying negotiations. But you can only see these benefits if you have the courage to ask.