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Home Buying Negotiations Round One: Price and Terms

October 15, 2007 | By Kelley Koehler | Filed Under First Time Buyer, Home Buying, Home Selling 

Earlier, we discussed the second round of home buying negotiations: Repairs.  Let’s go back and look at the first round: Price and Terms. 

There’s over 20,000 words in an Arizona Resale Purchase agreement.  There are dozens of possible clauses and contingencies that we may need to include or negotiate with, based on your individual situation.  Negotiating for a home involves a wee bit more than just filling in the blanks on a form.

Let’s look at some of the major items.

• Price.  Obviously, this is a biggie.  However, there’s price, and then there’s terms.  Sometimes good terms make up for a worse price, and vice-versa. 
• Earnest Money.  Earnest money is one sign of a Buyer’s commitment to the deal.  Sometimes, a Seller gets to keep a Buyer’s earnest money, so usually a Seller wants lots of it, and a Buyer wants to give as little as possible.  There’s a balance here to be found, with consideration to the rest of the terms.
• Closing Date.  A typical closing is 30-45 days, but I’ve done them as fast as 10 days or as long as several months.  Sometimes a Buyer or Seller has specific requirements for a close date.  The person with the most flexibility might be able to give the other party what they want here in trade for something else we want more.
• Inspection Period Length.  The boilerplate on the contract says 10 days, but we can negotiate for more or less time.  If you’ve got a demanding job and will have trouble attending inspections, then we need a longer inspection period.  If we’re trying to close fast, then we need a shorter inspection period.  Sellers normally want a shorter inspection period so that they get to repair negotiations faster – if we can’t successfully negotiate repairs and a Buyer walks away, then the Seller can put their home back on the market faster. 
• Who Pays Loan Costs.  Traditionally, a Buyer pays all of their loan costs, but it is becoming more common to ask for the Seller to make a contribution to those (and other) costs.  There are several ways to frame a request for closing and loan cost assistance, so discuss this carefully with your agent, with Good Faith Estimates from your lender in hand.
• Home Warranty.  Some people want ‘em, some don’t.  Built into the contract is the ability to negotiate for one.
• What Stays and What Goes.  Just because the MLS printout says the refrigerator stays, it doesn’t necessarily bind the Seller to leaving it.  Make sure you specifically ask for the appliances.  I’ve had some clients ask the Seller to leave appliances that were not included on the MLS print out.  Just remember that it’s all a balance between give and take. 

There are lots of extra clauses or contingencies that we might need to add, depending on the situation.  Is this a 1031 exchange?  As-is sale?  All cash?  Contingent on another home selling?  Do we need to move in earlier than closing?  Is there a well?  A septic tank?  A Homeowner’s Association?  Is there FHA or VA financing?  Is this a short sale?  Corporate or Bank owned?

When you put pen to paper to sign an offer to purchase a home, you’re making a myriad of commitments.  Make sure you understand the terms and agreement by having an open discussion with your agent!  After all, we’re here to make it all work out well for you.

Image via Flickr, byTT IN THE DESERT

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