1. Decide on a Real Estate Agent and Orlando Mortgage Professional You Can Trust
Unhappily, there’s no negotiating on this point. Start the new Orlando home purchase process on the right foot, and find an agent you can trust. Community awards, credentials, and knowledge are important but certainly not the only factors to consider. Find somebody who offers the best of both worlds– a professional whose answers you can count on and who you feel at ease talking to about fairly personal requirements. The home purchase process is still very much a people business, and having the right expert on your side will help ease future negotiations.
2. Negotiation Barrier Number 1 – The Commission
Now that you’ve found the ideal negotiation expert, it’s now time to turn the table and talk about commissions. A frequent question asked during the home buying course of action is, “who really pays the commission?” To the point, the buyer always pays. Why is that? Because commissions are normally a percentage of sale prices, the seller essentially includes these commissions into the final sale. If there were no commissions to be paid, the seller would have likely lowered the sale price. In fact, “For Sale By Owner” buyers commonly expect the seller to lower the price, knowing that a commission isn’t part of the equation.
3. Commission Negotiations Number 2: The Costs of a Home Loan
Furthermore, don’t overlook that there are commissions being paid for the loan origination. inquire from your agent how much you are being charged. Will this be paid out of your pocket, or will you be given an interest rate above wholesale to cover a yield spread premium (YSP)? In nearly all cases, asking the agent for a disclosure should help clear the air on how much you are really spending. Good Faith Estimates (GFEs) and Truth-in-Lending (TIL) disclosures can help make relationship shopping easier.
4. Question and Scrutinize Both Good Faith Estimate and Truth-in-Lending Forms
A mortgage lender is required by law to provide their Good Faith Estimate (GFE) within 3 days of receiving your application. Even though the GFE is just an estimate, you’ll want it to be as precise as possible to avoid any surprises at closing. With this GFE in your hand, you’ll find a inventory of estimated fees for the transaction– third party fees, lender charges, and cash needed at closing. The TIL shows your interest rate and APR (annual percentage rate), which makes it easier to compare loans. The TIL also indicates if there is a prepayment penalty associated with the loan. Your lender will only be able to give you a reasonably correct estimate if you reveal your credit (good, bad, or ugly), how much you have to put down, and the type of property you are buying.
5. Third Party Fees and Flexible Closing Costs
Whether you have exceptional or bad credit, third party fees could be a considerable chunk of your closing costs (especially if you are buying in a HUD-designated “high-cost closing state”). Title and escrow fees vary from state to state, but they are still negotiable to a certain extent. The buyer typically does have the right to choose the title company in the transaction, although many don’t bother. Additionally, other fees such as appraisal and inspection fees may not be set in stone–although they will have less margins to negotiate. In the end, compare your final third party and closing costs fees with the original GFE. While they may slightly differ, they should not be significantly different.
6. Consider an FHA Home Loan
If you have difficulty finding financing for the purchase of your new home, or the risk-based surcharges on a conventional loan are higher than you like, ask your loan agent if you can qualify for an FHA home loan. Due to recent increases in conforming loan limits, FHA loans have become a great alternative for borrowers with credit issues buying modestly-priced homes. Home buyers with previous bankruptcies or foreclosures will also find it easier to obtain a mortgage so long as they’ve had a clean history for about three years. FHA home loan interest rates are quite competitive and their fees are quite minimal. Although FHA financing is available to almost everyone, it is typically used most often by first-time home buyer and moderate income borrowers.
7. Entice the Seller: Come Financed and Ready to Buy
Before you start thinking about negotiating the listed price, do your part to come equipped. As an alternative of just getting pre-qualified, get pre-approved by a mortgage lender. Have your agent help you to get pre-approved for a new home loan based on your credit, income, and loan to value ratio. Buyers with a pre-approval letter will move to the head of the line in negotiations and be in stronger positions. Sellers see an approval letter as a commitment to buy, and will be more open to possible dealing.
8. Negotiate the price of the Home with the Right Information
Here’s where having the right expert by your side will pay off greatly. Ask your agent to do his or her homework and find out why the seller is selling. Is the owner in the middle of a job transfer or maybe even a divorce? How long has the home been listed, how many times, how’s the neighborhood doing? Did they already buy a home? All this information will help tune you into the sellers’ state of mind, and find out how willing they are to budge during negotiations.
9. Negotiate Your Way to Other Benefits, Don’t Just Center on the Sale
Although the sale price will likely be the focal point of negotiations, don’t look past other benefits such as seller concessions towards improvements, repairs, and closings costs. Buying a home is much more than signing for a mortgage and coming up with a down payment–with a few seller incentives, you can easily offset the costs of major repairs and upgrades. Additionally, other common seller incentives can include mortgage buy downs to help lower your monthly payments for the first few years.
10. Present Strong Offers, and Stop thinking about Lowball Offers. but Leave Room for Negotiation.
Clearly, you want to get the best deal. Unfortunately, so does the seller. Lowball offers create mistrust from the very beginning and do little towards serious negotiations. A strong offer is a serious one with a considerable earnest money deposit and room for further negotiations. Don’t complicate your initial offer with a list full of contingencies either. During negotiations, if the seller persists on a higher price, ask for something in return; maybe they can take care of the bathroom repairs, or throw in a few kitchen appliances and household furniture items?
Most importantly, always keep in mind that counter offers are still on the table for negotiation. Even if it’s a stingy full price counter offer, don’t hesitate to respond with another offer–after all, you have nothing to lose.
11. One Extra Negotiation Tip: Don’t Burn Your Bridges
Remember, this industry is still a people business. Don’t bad mouth the seller, the seller’s agent, and especially your own agent. This does little to help negotiations, and only creates mistrust between parties. Bottom line; don’t let your emotions ruin a negotiating opportunity.
Tags: first time home buyer, Good Faith Estimate, new Orlando home, Orlando Home, Orlando Mortgage
January 19, 2010 at 11:16 am |
This is an excellent resource for first time home buyers. This article contains very helpful and useful points. Great job for posting.