concessions Archives

Negotiating is More Than Just Price-Part 2

Last post we went over a couple other negotiating points that you have to pay some attention to when selling your house yourself. Those were the type of financing your buyer is using and the ever important earnest money. This post considers closing date, possession and concessions.

1.Closing date

Closing date is generally up to the buyer due to their lender. When the lender is ready you can close. 30 days is a common time, sometimes 45 days for more complicated loans like VA’s or some FHA special programs.

If you’re buying a house after your sale you might want to try negotiating a 45 or 60 day contract on your property and a 30 day on your new house. That way you have some time to find a house so they both can close on the same day. More often than not your house has to close before you can close on your new house, so the existing mortgage can be paid off.

It’s always good to have a backup plan, especially in a active sellers’ market, in case you can’t find a new home in the allotted time. A backup plan as in a place to live while you look for your new home.

You also will be negotiating when the buyer is taking possession, the day of closing or sometime after. At closing means as soon as the papers are signed the buyer can move in. Which also means that you must be out.

2. Concessions
Concessions are when the buyer asks for something. The most common concession is the seller paying the buyers closing costs or a portion thereof for him/her. Other than the title insurance and the closing fee the buyers closing costs and prepaids are origination fees, filing fees, underwriting fees, appraisal fees among others.

Prepaids are part of those closing costs. Prepaids are so much taxes and insurance put into the buyers escrow account by the bank.

The buyer may be negotiating for furniture or appliances or other personal items.

You may not have to deal with any of that if your house is in the pristine condition it should be before putting it on the market. Look for that full price, or better, offer that comes with proper preparation of the property.

Remember it’s not just about price when negotiating a contract. There are other factors that matter to you also.

Negotiating is More Than Just Price-Part 1

by Joel Weihe

Negotiating is more than simply agreeing on a price. There are other considerations. When negotiating an offer, the price is more than likely the one thing everyone is focused on. The other points are of some importance too so let’s touch on those.

Financing

The source of financing is something that matters too. Who, or what company or bank, is financing your buyers purchase. Where the money is coming from is something I always pay attention to. If it’s a mortgage company or bank I have had problems with in the past I’ll let my client know, along with my opinion.

You want a reputable company or bank. At the very least one you’ve heard of or can research. Check any comments and/or reviews you can find online.

You’re allowed to call the lender and question them. They’re not allowed to give you personal information about the buyer but you can ask. You’ll get a sense or a feeling from speaking with the loan officer.

Ask:

Is this a solid buyer?
Do you foresee any problems?
Can you give me any guarantees this loan will go through?

When you go into contract your house gets pulled off the market. You want to be sure, or as sure as you can, that your deal is going to close. That your buyer is going to make it to the closing table.

Earnest Money

Earnest money is a “good faith” deposit not to be confused with a down payment. At closing the earnest money will be applied to the buyers down payment or closing costs. What is the amount of earnest money you will accept? The more the better. Earnest money shows the buyer is serious and he/she is not going to back out. If they do for no good reason they lose the earnest money and the seller keeps it.

Around here we generally ask for $500-$1000. Our average price point in Wichita KS in 2018 is $140,000. I would recommend as a FSBO to ask for 1-3 percent of the contract price.

Most contracts have contingencies built in how buyers can get earnest back . The definition of contingency is occurring or existing only if or subject to change. A contract may be contingent on the buyer successfully obtaining financing or inspections. These are the potential reasons a buyer may have earnest money refunded.

Financing falls through.
Parties can not come to agreement over requested repairs as a result of a home inspection.
Death in immediate family.
House doesn’t appraise at contract price.
Job loss.

All state contracts are different and have their own rules and clauses about contingencies. Be sure and understand yours. In a strong seller’s market it may be prudent to write earnest money non-refundable into the contract. A buyer willing to sign a contract like that is confident about his/her ability to obtain financing.

When Your Buyer Asks for Concessions

by Joel Weihe

When your buyer asks for concessions it means they are negotiating more than just the price. Concessions are anything the buyer is asking for outside of price. If the buyer is financing a loan for the house he may ask you to pay the closing costs for him/her. There could be furniture the buyer likes and wants you to leave behind. A concession is a thing that is granted, especially in response to demands. A thing conceded.

concessions, 3d rendering, traffic sign, blue sky, clouds — Concessions, traffic sign

The most common concessions asked for by buyers is to have you pay their closing costs for them. Closing costs are incurred when financing a real estate purchase. Costs incurred include loan origination fees, discount points, surveys, deed recording fees, taxes, credit report charges and flood plain determination fees. There could be others but these are the most common.

Prepaids are also included in closing costs. Prepaids are buyer costs collected at closing and put into an escrow account for expenses such as taxes, property insurance, mortgage insurance and special assessments.

Asking for closing costs to be paid has become common. So common many times it is expected by buyers. Sometimes lenders make it a condition of pre-approval. It doesn’t mean you have to accept, it’s simply part of the negotiation. When a seller agrees to pay closing costs for a buyer the amount is generally added to the price. It’s not like someone’s giving money away. The potential problem when paying closing costs is the appraisal.

If a house doesn’t appraise the contract has to be renegotiated. A bank will not lend more then the contract price under normal circumstances. If closing costs are being paid and the house does not appraise the seller will want to take away the paid closing costs. That way the bottom line stays the same. The buyer will still want the closing costs paid but at a lower contract price. There’s potential for the deal to fall apart at this stage.

In some states it’s not common to leave appliances with the property. Asking for said appliances is another concession. Sometimes potential buyers may ask for some of your stuff in an initial offer. That stuff could be your furniture, wall hangings or electronics. I’ve seen buyers ask for riding lawn mowers on homes with large lots.

Concessions are part of negotiations. In a buyers market concessions are asked for more often. In a sellers market not so much simply because the buyer doesn’t have as much room to negotiate. You don’t have to say yes and you don’t have to say no to concessions, it’s all part of the negotiations.

You can easily sell your home yourself. It’s your money, keep it.