So, you’ve looked everywhere, and you’ve found the home you want to live in. You’re happy with the location, the asking price is within your budget and you feel ready to take the next step. Now it’s time to make an offer to purchase the home. As the buyer, negotiating how much you’re going to spend is such an important part of the process. You want to find the appropriate deal not just for yourself, but for the seller as well. Everything in the transaction is detailed in the Agreement of Purchase and Sale which lists the full legal names of the buyer and seller, the brokers, a full legal description of the property and the purchase price including the deposit (the payment that demonstrates serious intent to buy the property, this amount is then credited to the purchase price). When you make the offer, it’s accepted by the seller, and any conditions are met (if there are any), it becomes legally binding. Both you and the seller are obligated to hold up your ends of the agreement and complete the transaction. For that reason, you must be sure you understand what’s in your offer before you sign.
Every offer is unique, and therefore, every offer will have different conditions protecting the buyer or the seller. Keep in mind that if a seller receives two offers, one with conditions, and one without, the seller will generally be more inclined to accept the unconditional (firm) offer. Always consult your lawyer concerning the use and wording of conditional clauses, as if it’s not legal it can’t be put in place. If you are going to arrange a mortgage to buy the property, it is customary to make the offer conditional upon financing for a specified period of time. In the event that you are unable to arrange adequate financing within the time period, the offer is null and void, the deposit is then returned to the attempted buyer, and neither party is under any further obligation to proceed.
The irrevocable date and time is the period in which the potential purchaser has made an offer which they are legally bound to keep, and the seller decides whether they want to accept the offer or not. Our preferred time frame is typically 72 hours, although we sometimes see it spread out for a few more days. Creating a smaller window is a useful tactic to put pressure on the seller to compel them to make a quicker decision on your offer.
When you close you need to know what is included in the purchase price. Fixtures are permanent improvements to a property that remain within it at the end of the finalized sale. Chattels are moveable pieces which are not physically attached to the property. The distinction is generally, but not always, clear. Fixtures can be exceptions in the offer, if there’s a chandelier that’s a family heirloom the seller can claim that as part of the agreement. Legally that object is a fixture, so it must be mentioned in the paperwork. As a buyer, you can negotiate to keep chattels within the property. With such a large purchase, the homeowner will likely be more accommodating in the offer to help further the process.
It’s a must to research the property and the area before you make an offer. You want to understand the true market value, which is done through understanding how much similar homes in the area have sold for. You can utilize this information to negotiate for a more fair price on your behalf if you back up your claims with the proper evidence. The list price is irrelevant, it’s up to you to determine if it’s a good value.
We strongly advise that you have your lawyer review the document before you submit it to the seller as you are legally liable to stick to those conditions that are spelled out within. If timing is critical, you can insert a clause making the offer conditional upon your lawyer reviewing the offer, this is usually over the course of a few days. Be aware that the lawyer’s job is to review the paperwork and ensure that you are protected, it’s not their job to comment on the value of the property.
After the offer is signed, a meeting is arranged with the seller and the listing agent. The seller can accept the offer, reject it or make a counter-offer, but only during the irrevocable period. If the offer is rejected, it may be because your opening bid was too low for their liking or that the terms were not acceptable. At this point you may want to raise your offer and try again. In the event the seller makes a counter-offer, they have indicated an interest with proceeding, and have begun negotiating. This may result in a back-and-forth until both parties are happy.
If you are happy with the property but have minor issues with elements of it, you can utilize that to your advantage. If it has an odd smell, if it needs a fresh paint job or new tiling you can use this in your negotiations. These are things that you can resolve yourself with minimal costs and some effort. These are definite factors to consider in the home buying process as it’s customary for the property to look like a model home. The seller will likely be receptive if you have an interest along with founded issues with the state of the house.
If they are dead set on the price you can negotiate for other things in the purchase. If you want to keep the furniture or appliances, the seller may comply as it is convenient for you and low cost in comparison to the property. If you have your eye on something they may use that to persuade you to purchase, which works for your benefit. In any negotiation, it never hurts to ask. They may say no which doesn’t influence the deal, but you have the potential to walk away with more than expected. Be open to what you want, the aim of both parties is to make the other satisfied with the transaction.
Expect to compromise with the seller. It’s not uncommon to have a back-and-forth for each other to fight for their own best interests. Unless the seller is in a hurry to get rid of the property, they will be looking to benefit as well. Again, the ideal goal is to find a middle ground that makes both the buyer and seller happy. Be firm in what you want but don’t expect to get everything.
During the negotiation process be the one that speaks less. This gives you more control over the conversation, as any information they provide can be useful. The more knowledge you have, the better command you will have of the situation. Ensure the few statements you make are probing questions. Get them talking about the property to understand every detail possible to see what it has to offer and if there are any hidden defects you can be clued into. What has changed in the property since the seller took ownership? What should I know about the neighborhood? What repairs have you done to the property? This process is about finding the finer details that an inspection and spending a few hours in the area may not provide.
You want to find the motivation of the seller as this could potentially benefit you. If there is any issue with the property you could leverage that into getting a deal, or it could give you a reason to not want to own the property. If they are in a hurry to sell the property, you may be able to negotiate for a higher offer or better conditions.
With this information and utilizing your due diligence, this process can help save you a substantial amount of money and help you discover if this is the right property for you. Negotiation is just part of the home buying process. This can be quite a challenge for first timers, if you have the option ask a real estate agent to help you practice, utilize them.