We all want to get the most bang for our real estate buck that we can. There are, of course, many angles to and many ways to go about getting more value for your purchasing dollars. But, as we all know, the best way to make money is simply to spend less on any purchase, especially with a transaction as big as buying a house. So, with that in mind, here’s how to lower your real estate costs when buying in . It’s a two-pronged approach that will allow you to spend less and keep more of your money in the bank.
Negotiate a Better Price
One effective way to lower your real estate costs when buying in is to negotiate a better or lower price. After you’ve located a motivated seller, which always works in the buyer’s (your) favor, the strategies involved here include:
- Making a realistic offer – You don’t want to make a ridiculously low offer, but you don’t want to offer more than you’re really willing to pay. Best is to make an offer near the bottom of the realistic price range.
- Being willing to move on – Don’t get hung up on the first property you come across that you really like. If you can’t get the reasonable price you want, then move on to another property.
- Displaying enthusiasm, but not too much – When it comes to price negotiations, you can also lower your real estate costs when buying in by showing some enthusiasm. The seller will know you’re truly interested and will be more inclined to work with you. But don’t go overboard and make it seem as though you want the property at any price.
- Setting an expiration date – When you make a formal offer, be sure to include an expiration date for that offer. A short period like 24 hours will force the seller to make a decision, and it will help you avoid having to compete with multiple other offers.
- Getting creative – If the seller won’t budge on price, you can try to get other concessions, which (if you get them) indirectly lower the sale price. You could, for example, ask for roof repairs or that the kitchen appliances be left in the house.
- Research the Local Market
- Know the market conditions: Understanding whether you are in a buyer’s market (more homes than buyers) or a seller’s market (more buyers than homes) is crucial. In a buyer’s market, you’ll have more leverage to negotiate a lower price.
- Analyze comparable sales: Look at recently sold homes (comparables) in the same area with similar features. This gives you an idea of what the house is worth, and you can use this information to justify a lower offer.
- Get Pre-Approved for a Mortgage
- Strengthen your negotiating power: Being pre-approved shows the seller that you’re financially ready to buy, which can give you an edge, especially in competitive markets.
- Quick closing: If you are pre-approved, you may be able to offer a quicker closing time, which can be appealing to sellers looking to move fast.
- Be Willing to Walk Away
- Know your limits: Set a maximum price you’re willing to pay before you enter negotiations. If the seller isn’t willing to meet your price, be prepared to walk away. This can sometimes encourage the seller to reconsider their price.
- Look for other options: Don’t get too emotionally attached to one property. Having other homes in mind will keep you from overpaying.
Lower Closing Costs
The second very effective way to lower your real estate costs when buying in involves lowering the closing costs. Some good strategies are:
- Shopping around – Closing costs are a big chunk of money, so make sure to shop around for a lender that offers the lowest closing costs. If you already have a lender, you can ask them to match the lower closing costs offered by others.
- Carefully examining the loan estimate – Go through the loan estimate with a fine-toothed comb, making sure it hasn’t been padded with unnecessary fees, usually those involved with processing and underwriting.
- Negotiating with your lender – You can ask for some of the many obscure fees to be taken off. And ask to see the Closing Disclosure form as soon as it becomes available. This form details and itemizes all the closing costs. When you get it, compare it against the loan estimate, and if you find any discrepancies, challenge them.
- Getting the seller to sweeten the deal – Sometimes you may not be able to get the closing costs down much. In that case, you can ask the seller for certain concessions to offset the closing costs, which comes out to the same thing in the end.
- Delaying closing – You can minimize pre-paid daily insurance fees by delaying closing till the end of the month.
- Look for First-Time Homebuyer Programs
- Grants and assistance: Many states and local governments offer down payment and closing cost assistance programs for first-time homebuyers. These can significantly reduce your out-of-pocket expenses.
- Special loan programs: Look into loan programs like FHA, VA, and USDA loans, which often have lower closing costs or offer benefits like no down payment (VA and USDA) or reduced mortgage insurance.
- Review and Shop for Service Providers
- Title insurance: You can shop around for a cheaper title insurance provider instead of going with the one recommended by the lender. You can also negotiate discounts if both the owner’s and lender’s policies are purchased from the same provider.
- Home inspection and appraisal: Don’t just go with the first company recommended by your real estate agent or lender. Get quotes from multiple service providers for appraisals, home inspections, and other services.
- Attorney fees: If you need a real estate attorney, compare rates and negotiate for better deals.
The fact is you can lower your real estate costs when buying in if you negotiate a better price and work to get the closing costs down.