We thought we’d share with you these advanced home negotiating techniques. The best part of the first technique is that it benefits both the buyer and the seller if used properly.
In a shifting market with rising inventory most sellers realize they must be competitive. Reducing the price is one way to get in the game, but what if there is another?
Simultaneously, the reason we have rising inventory is because buyers are struggling to pay higher prices and higher rates at the same time. Today we’d like to share a concept that will help both.
Permanent Rate Change
Let’s say we have a $500,000 home. Also let’s say we have a buyer putting 20% down and financing $400,000. The buyer could offer $490,000 to help make their payment a little better. We ran a scenario last week, and by offering $10,000 less the buyer would save about $72/mo. Not bad if the seller is willing to participate. But what if the buyer still does not qualify? This particular buyer might have to offer $450,000 to qualify. It’s a shame because this buyer loves the home, but the seller won’t come down to $450,000.
Now, let’s take the exact same home and the exact same buyer and look at it a different way. What if the buyer offered the list price of$500,000 but asked the seller to pay closing costs up to $10,000? With that money we buy the rate down from 7.5% with $2,000 in points to 6.25% with around $10,000 in points. By buying the rate down the new payment lowers by $333.99. The buyer qualifies for this payment when they did not qualify for the previous payment.
It is the same $10,000 just used a different way. The results can be enormous. You can watch the entire video online that explains it. Our example only shows the principal and interest portion. Obviously there will be taxes and insurance which varies by property.
Additionally, these numbers change by credit score, amount down, etc. Every buyer and every scenario is different. What stays the same is the concept. Once you understand the concept, we can run scenarios that best help your situation.
2/1 Buydown Option
We looked at a 2/1 buydown, but the day we ran it the permanent buydown was a better deal. A 2/1 buydown lowers the rate by about 2 percent the first year and 1 percent the second year before setting in on the permanent rates the final 28 years. The buydown is temporary.
There are many more types of loan products we have access to. Keep in mind, we are not lenders. We are real estate agents that understand the process because we’ve worked through several interest rate cycles and have experience. Many new agents have never worked in these conditions, so they don’t have that knowledge to put and keep deals together. It’s a shame, because many times there is a willing buyer and seller, and they just don’t know how to keep it together.
Putting it All Together
The key is working with people with experience and a great team. We work with lenders who have decades of experience. Sometimes all the elements of a great deal are there, and people just need help structuring it to make it work. The days of 50 buyers bidding on every property and paying cash well in excess of the asking price are over. Financed deals are back in play, and this is where experience matters most.
Always call the Ellis Team at Keller Williams Realty 239-489-4042 or visit www.LeeCountyOnline.com to search for your next home. We’ll show you hot to use this and other adnaced home negotiating techniques to work for you.