House hunting? Time for homebuying negotiation boot camp
Prepare for battle when house hunting. Here are 8 common homebuying negotiation misconceptions and the lessons to learn to protect your bank account.
All right, recruits! Fall in and listen up! When it comes to the crucial skill of negotiation, you newcomers to the homebuying process are in no shape to buy a house. Look at you — your minds are flabby and your wills are weak. That kind of cluelessness will cost you dough — potentially a lot of it — when you finally sign on the dotted line.
But we’re gonna change that. Now drop and give me your misconceptions, so our real-estate drill instructors can whip you into shape. (Bing: What exactly are closing costs?)
1. The negotiation misconception: Let’s just jump right in and start looking at homes
Drill sergeant says: Patience, new recruit! “Nine-tenths of negotiation is preparation,” says Gary Eldred, author of “The 106 Common Mistakes Homebuyers Make (and How to Avoid Them).” A negotiation “is really about information. You gather as much information as you can” before you start the homebuying process, Eldred says.
What kind of info? What homes sold for — and the asking price, too — in the neighborhood that interests you is a great place to start. Other info: the value of features such as fireplaces and views, and info about neighborhood schools and amenities.
You should quiz yourself as well: Before you do anything, write down a list of your must-haves and deal-breakers in a home, and your comfortable spending limit, writes Joseph Eamon Cummins, author of “Not One Dollar More: How to Save $3,000 to $30,000 Buying Your Next Home.”
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Do all of this before you even meet a real-estate agent, Cummins advises. One of homebuyers’ biggest mistakes is that “(t)hey went to talk with their friendly real-estate agent much too early — and much too openly for their own good,” Cummins writes.
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2. The negotiation misconception: Your real-estate agent is your buddy, so tell her what you can spend.
Drill sergeant says: Never forget that your agent is ultimately there to sell homes, Cummins says. When you finally do meet with one, don’t tip your hand: “Never divulge your upper spending limit. My advice is that you should not reveal your true comfortable spending limit, either,” he writes. “You’ll have to give some indication of the price range that interests you. My recommendation is that that figure should be 5% to 10% below your comfortable spending limit, adding that you might be able to increase the figure slightly for an [exceptional] home.”
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3. The negotiation misperception: When you see a good home, express your interest.
Drill sergeant says: Oh, newbie — when will you learn? “Don’t show them how you feel about it when you walk through the house,” says Peter Vekselman, a real-estate mentor. Emotion will tip off the seller or seller’s agent that you’re excited. That doesn’t mean you have to denigrate homes, says author Eldred; in fact, sharply criticizing homes can hurt your chances if the seller takes offense. Simply put, “Never be rude, but never be effusive,” he says.
How do you keep from showing your hand when you find a home that intrigues you and you want to ask a lot of questions? Cummins advises asking the same five questions of any home you look at: What’s the asking price? What’s the owner’s reason for selling? How soon does the seller wish to close? How long have the owners lived here? What repairs have been done to the place?
4. The negotiation misconception: A home is a home; it doesn’t matter who’s selling.
Drill sergeant says: Who’s selling a home, and their situation, can matter enormously in a negotiation. Are the owners getting divorced and do they need money fast? Has the owner just died and do her children want to dispose of the family home quickly? Once you’ve identified a home you like, try to learn as much as possible about the owner: Talk to neighbors and ask politely about the owner. Eldred, a runner, says he likes to jog around the neighborhood and talk with people who live nearby to pick up info.
Another negotiating tip: If you’re somewhat confident of your abilities, deal directly with the seller’s agent, instead of going through a buyer’s agent, Eldred says. “One of the advantages of dealing with a seller’s agent is that a seller’s agent often discloses more” than maybe he or she should, he says. That additional information can help you negotiate a lower price.
Perhaps I have time to write about this after my real estate lawyer forwarded it to me and I am laid up after surgery. Or perhaps I have time to post this one also because I am a landlord who has successfully bought all my properties without a single realtor to help me and I can now do pretty much what I want. Either way the only people who actually think realtors serve a purpose in this day and age are idiots who have not dealt with them yet and other realtors who are diluting themselves. No one cares about the "professional" opinion of someone who was 'licensed' in a weekend seminar. Cab drivers go through rougher training in most parts of the world. Here is what I can tell you. After buying a place no one ever says "my, that real estate agent really earned their money!" and with the internet you can do all of the cursory "work" a buyers agent would do in a matter of seconds. TO ALL REALTORS- I am sure there are few decent and intelligent realtors in the world that realize I am right, but to the rest seriously, get a real job.
This was obviously written by a greenhorn, and before the creation of Buyer’s Agency. If you come to me when I am representing a seller I will give you a great deal! I just hope that we can get it to appraise for you.
I have clients who must have read your article before. They have lost out on three homes and were really upset when they lost the last one. The home was ALREADY UNDER PRICED BECAUSE THE SELLER WAS IN A DESPERITE situation. It sold above the asking price and their offer wasn’t even looked at. I told them,”Don’t get mad at me you told me that was your top price.”
Today the last person you negotiate with is the Seller’s Agent. It saves you nothing especially when you are new to an area. So many times the buyer has come to me thinking they would have an advantage but they don’t. I have already coached the seller about what to do if I bring them an offer.
Agents who say they can represent both the seller and the buyer should be thrown in jail. They just want both sides of the commission. Why would the listing agents give you their fiduciary responsibility when you only want to buy their listing? And if the buyers sign a buyers agency agreement with the listing agent and they didn’t tell the buyers about a better priced home on the market the buyers can sue the agent if they were smart enough especially when the home you have listed is overpriced to begin with.
Many of the other comments here are from fellow Realtors. I'd like to echo much of the negative sentiment towards Mr. Solomon's article and add that, based upon MSN's own contributor biography, he would be better suited to write for the sports section of MSN's page especially with the 2010 winter games a mere hours away.
I am further appalled that this article seems to have been on MSN's page since late December and yet MSN continues to run it despite the negative feedback in this blog. Or perhaps MSN just doesn't care that it has sunk to a level of media mediocrity that puts them on the same level of believability as The National Enquirer.
This article makes me sick. This is worse than the late night infomercials that say you can buy houses for pennies on the dollar. Buy my program I'll show you how. There are fantastic deals on houses right now. Not all realtors are out to make a buck. Some of us really care and actually walk away when clients refuse to listen. And that gets us honest realtors in trouble because we are under contract.
I don't know what planet this person is from but their article is only good to use in an outhouse.
I am a Buyer's Agent in Ellensburg, Washington and I was shocked at the author's comment that you should not disclose to your agent what you want or can afford to pay. If my clients did not me TRUST ME anymore than that, then why would they want to work with me? It would be an insult to me and I could not represent them to the best of my ability. It is not about how much commission I can make off my clients, but about helping them negotiate the best deal they can on the home they want. I want them to like me "after the sale" and feel good about the price they paid. Yes, this is how I earn a living, but not at the expense of my client's pocket book. MONEY ISN'T EVERYTHING. PRIDE AND SHARING THE EXCITEMENT OF SOMEONE'S HAPPINESS AND THANKFULNESS FOR YOUR HELP - PRICELESS!!
I've bought and sold 4 homes in several midwestern states over the years. Believe me, this is an excellent and practical article for buyers on how to negotiate a real estate transaction. Clearly the previous comments are from real estate agents that love to have mindless sheep for clients. Above all, educate yourself. Information is power.
This article is a misleading and misguided depiction of the home buying process and of the role Realtors® play in helping their clients become homeowners. His advice to buyers to withhold information from the real estate professional who represents them is irresponsible and ill-advised, as is his recommendation that buyers consider negotiating directly with the seller’s agent.
Anyone who is considering buying a home should know that the seller’s agent represents the interests of the homeowner, and a buyer without professional assistance is at a severe disadvantage.
Realtors® are trusted resources for real estate information and can help home buyers navigate the increasingly complex home buying process – this includes helping them determine how much house they can afford and negotiating on their behalf.
Realtors® have good reason to represent their buyer clients to the best of their ability – not only do they have a fiduciary duty to their clients, they have also subscribed to NAR’s strict Code of Ethics as a condition of membership, which stipulates that Realtors® work toward the best interests of their clients and treat all parties in the real estate transaction fairly.
This commitment to client service pays off – nine out of 10 recent buyers were “very satisfied” with their agent’s honesty and integrity. And consumers who have worked with a Realtor® are sold – more than four out of five recent sellers and buyers said they would use the same agent again or recommend that agent to others.
Rather than scare would-be home buyers with battlefield analogies, Mr. Solomon should focus on providing constructive advice for buyers – like treating the real estate agents who represent them as partners in the transaction, not adversaries.
By Christopher Solomon of MSN Real Estate is non professional advise.
Christopher (a free lance writer) is clearly not a Licensed Real Estate Professional but is in need of getting crucial information either for himself or other Buyer's out there and welcomes the responses as he is educated on what the Real Estate Market is all about by Licensed Real Estate Professionals on this post. Way to go Christopher by putting out bad advise and relying on hard working realtors to respond to this post for educating you and other buyers of how it's really done in today's Real Estate market. Get a clue and interview a seasoned Realtor who can give you sound advise before publishing this garbage and misleading Buyer's and harming everyone in the process with this mis-information called "Buying a home? Time for negotiation boot camp." Boot camp is training that is acquired after a long period of investment in time, energy, blood, sweat and tears. This Article far from that. Get it right before putting this non professional and bad advise out for others to read.
Replying to the post by:
Sunday, December 27, 2009 12:01:46 PM
Why did you pay the Buyer's Agent 2%? You indicated that "only someone with a lower than average IQ would need to work with a realtor again - it's just not that hard." I'm curious how you got the comparables that sold within the last 6 month's to set the sales price of your houses. If you didn't do that how do you know that you made the most profit from each sale? I disagree with you about not needing Realtors. The MLS is maintained by the Local Realtor's Association, which by the way is made up of Dues paid by, yes Licensed Realtors. The cost of doing business with a Licensed Professional Realtor is spread out over Marketing, National and State Dues, Office Space, Transportation, fuel, software and other costs that are passed onto the Seller's. If you knew what the Department of Labor Statistics are on the average income for a Licensed Realtor you would agree that you are misinformed. After all, the Realtor is trained to get you top dollar for your property. That is if you trust and do what they advise because they are trained and do it every day, not every 5 or 10 years. Which is the time most people move. So it turns out that you actually used Realtors to get your houses sold either directly by your own admission by paying 2% as well as an MLS Listing fee or indirectly by deceiving realtors to give you comparable prices for your houses. Either way, we are here to stay and trained to help buyers and sellers get the most for their money. That is because money is all that matters, right. Lol, I don't think so. Think outside of the perceived misconceptions and maybe you will understand what I'm talking about. Good luck on all of your future sales "without" realtors.
Sunday, December 27, 2009 12:01:46 PM
As a seasoned real estate investor I agree with most of the advice given in this column. Why not start low? Especially in today's economy. I've seen agents (listing and buying) that have disclosed more than they ethically should to "get the deal closed." I NEVER tell my agent what I will ultimately take when I'm selling my house. I NEVER tell my agent what I will ultimately pay for a house. This is absolutely valid advice.
Sounds like a bunch of realtors writing the negative comments on this article.
I've worked with agents and without agents to buy and sell homes. Agents make a ludicrous amount of commission for very little work. I think they are worthwhile for first-time homebuyers or homesellers but after that first introduction, only someone with a lower than average IQ would need to work with a realtor again - it's just not that hard. I've written up contracts on a single sheet of paper and worked directly with the seller. The MLS is the ONLY tool standing in the way of a getting rid of the excessive commissions. My dream is that a competing tool will finally gain enough acceptanc that it would tip the scales and allow average Joe's to sell homes and find homes without havin to pull in realtors.
My house is worth about $500,000 and I refuse to pay 6% commission ($30,000 dollars) to realtors. I sold my last house for $459,000 and paid $750 to get it listed in the MLS. I paid 2% to the buyer's agent. No problems, no hiccups. Although the buyer's agent was a piece of work -- really rude and unresponsive and almost caused me to cancel the deal. I think she was really teed off about the 2% commission. She hadn't noticed that little detail in the MLS. Remember folks, commissions are not set in stone at 6%. If everyone starting paying 3% (1% for listing, 2% for buying), things would be a little more sane and you wouldn't be handing over so much of your hard-earned equity at closing.
NICE ARTICLE. WELL WRITTEN. VALID ADVICE.