How to Negotiate Price on a Home

Patriot Nation, you've been doing so great up to this point. You've been watching my videos, educating yourself, aligning yourself to be ready for a mortgage financing, and now you're ready to shop. Or you've got a house almost under contract that you really are trying to go after hard, but you want to know how to really negotiate the best deal. That's what it's all about at the end of the day, right? I'm going to share some serious pearls with you today. I've got over 20 years of experience on all sides of these transactions over hundreds of deals where I'm either the representing the selling side where I'm representing buyers like yourself as real estate agents or of course as a loan officer helping structure the deal for people like yourself along with the buying side agent. So I know my numbers and I know how to structure things. And guess what? Spoiler alert, it's not just about price. There's plenty of ways to negotiate a deal. And most of the times I don't negotiate on price to be honest with you. And we're going to get into all that. I'm going to show you why. Watch it through to the end. Share with your friends. And if all this is of interest to you, let's kick off this rodeo right now. Hi folks, I'm Kevin Fagen. I'm the mortgage patriot on your side. Nestled here in the Hill Country above San Antonio, Texas. Serving all you proud Texans and all you great folks all around the country. So, a big one. A big one. a big one today because this is this is all about negotiation. Most of my videos talk about education in terms of financing or special programs that you know help you acquire a home. Here we're going to talk about the nuts and bolts of and the strategies of trying to negotiate the best deal. U and that can save you thousands of dollars either on the cash to close side or just lowering your actual purchase price. So, we're going to get into all that, but as I do, please hit the like and subscribe below. that helps me with my YouTube algorithms and brings my content up to the forefront. So, do that please and let's get into that content right now. So, they say that most everything in life is negotiable and with real estate and real estate purchasing, uh, that's more true than ever. So, would you believe there's plenty of ways to negotiate just including price? Of course, you can negotiate on the purchase price. Absolutely. You can negotiate along seller concession concepts. You can negotiate around furnishings whether they convey or not. You can negotiate specific line items in the contract in terms of expenses. Who's going to cover them? Seller or a buyer. You can negotiate uh along financing terms. We'll get into that. And lastly, would you believe that even when you get under contract and you're now working to get the your loan done and go to closing, you're still not finished negotiating, there's still maybe one, if not even potentially two rounds of negotiation more ahead of you. We'll get into that. All that's all that's huge. So, let's start with price negotiation because that's the easiest one for everybody to understand. So, as I mentioned, negotiating on price is the easiest one because everybody can see the price, right? The listing that you have on a house that you're really interested in is, let's say, say $300,000. You want to make an offer on it, but you don't want to pay that much. You need to know through your buying agent that represents you, someone like myself or someone that you could hire. They've got to be able to give you comps. They're going to give you sold comps and active listings in the neighborhood, not some other neighborhood nearby, even if it's a joining neighborhood because your neighborhoods can slightly difference. Homes in your neighborhood that have sold in the last four to 6 months at the latest. So, you know, the market and let's say those solds come in about 285 and your active listings are at 290. Well, we know that then 299 or $300,000 listing price is too much. This is what I like to do. I like to give the listing agent the comp. I tell them the comps down the street. I say, "Hey, you know, you're listing us at 299, uh, but we're submitting an offer to you at 280. We think it's pretty strong because, hey, the house around the corner, which is very similar to this home, sold for 282 four months ago, and rates have gone up since." So, it's that, you know, so our offer at 280 is a pretty good offer given this. And the reason why you want to do that is because a lot of times the listing agent is, I wouldn't say they're on your side. They certainly represent the seller, but they don't always dictate the price. The seller typically is dictating the price. And they may know in their heart the 299, they're not going to get it. But they're emotionally, you know, bound to the property. But if they see through your agent and through your own efforts, comps that are around the corner that come in around 280, 285, then they'll that gives them ammunition, the listing agent, to go to the seller, say, "Hey, we may be a little bit off. This this offer might be pretty strong actually. Let's talk about it." Rather than they just immediately reject it at 280 without, you know, without you showing them any comp. So that's the reason you don't just blanketly throw out a lower number. You've got to provide, you know, some analytical data that helps the listing agent to be on your side. So that's rule number one with with negotiating on price. The next way to negotiate beyond price is what they call seller concessions. What are seller concessions? Those are the closing costs that the selling part is willing to cover for you for your benefit at closing. Why would they do that? Well, because they want to get a deal done, frankly. And given the market, if the market is soft at all or at least, you know, a a balanced market, other words, it's not just a screaming sellers market, you should be able to get seller concessions. I get seller concessions probably nine, if not 10 out of 10 times. Question is how much. And you're limited in your seller concessions amount by the loan program. So FHA allows up to 6% seller concessions. Commissioner loans allows for up to 3% seller concessions. And VA loans and I think USDA are are both 4% seller concessions. Now, you don't normally get max amount of seller concessions, but you can always count on at least two to 3%. So, let's go back to our example of a $300,000 listing that you think through your comps really comes in about 285. I would be offering 285, for example, and I would include 2% seller concessions. So, you're actually buying it for less than 285. You're buying it for 285 minus 2% more because you're asking the selling party to cover those cost of closing. So seller concessions are actually the the thing that I typically negotiate around. Why is that? Because most of most of my base here at Patriot Nation are first-time home buyers and they lack the capital to to write a big check at closing. So they'd rather buy something at 285 and have, you know, $7,000 of closing cost coverage than to buy something at 277,000 with zero seller concessions. So negotiating around seller concessions is actually many times larger or more impactful to you as a buyer than lowering the purchase price a little bit. Keep that in mind. So we covered the two areas big areas of negotiation. That's price of course and seller concessions. Now let's talk about the specific uh items that are in the contract right now in the state of Texas and in most states. You can negotiate along the basis of specific expenses like who's going to pay for the title policy and that's not cheap on a $300,000 house in Texas. That saves you about $1,500 $1,600 if a seller picks that up. And the survey, it's about a $500, $600 item depending. Saves you, you know, quite a bit of money. Also is the home warranty. You can you it's advisable to have a home warranty when you first buy a home because you want that that comfort, right, of knowing that certain items are covered in case they they break in the within x amount of time. In the contract of the state of Texas anyway, you have the ability to put in however much you want the the seller to contribute towards that first year's home warranty. Usually, it's about a $500 or $600 expense as well uh for that policy. And you also have furnishings. Not always is the refrigerator going to convey. Your agent needs to know, hey, is that refrigerator going to stay or or does that convey or do we have to try to buy that? That's a point of negotiation as well. Or there might be some giant plants that are in big big vase or something that the seller would rather just leave there. And you can write up a a list literally of nonattached items that you would like to keep as a new buyer in in in the new home. And sometimes the sellers will just roll over and say, "Hey, sure, take it." And next thing you know, you've got a brand new refrigerator or you've got a refrigerator you think you're going to pay for and you've got a couple other maybe furnishing items. So there's furnishings are negotiable as well. Believe it or not, as I mentioned earlier, even if you get your contract accepted, let's say in our example, the listing price was 300, you offer $285 based on your comps, you put in $5,000 for seller concessions, you ask for a coverage of $500 for the survey and $600 for the home warranty, and you get accepted. Great. Guess what? You have an option period now that your agent's going to know about. It's usually about 7 to 10 days, and you have time to inspect the property. As you inspect the property, let's say you find out that there's some wiring, uh, faulty wiring that you didn't know existed and a seller didn't list that on their seller disclosure. Okay, now we all have problems, right? Well, you don't want to back away from this deal. So, you negotiate again during the option period based on the inspection report. You're going to get an inspector going out there. He's going to bring back a report. It's going to show that faulty wiring. You're going to send that to the listing agent. Say, "Hey, we didn't know anything about this. Apparently, maybe y'all didn't either. we're going to accept that you didn't know, but we are asking $4,000 more now to come off the price because that's what's going to cost us to fix this once we get out of closing. So, that's a second round of negotiate that happens all the time. And it's very important to understand that. So, just because you're in at 285 and all your other things you have, you're not done yet. And you can negotiate yet again a second round based on that inspection report, you can also negotiate a a third time based on the appraisal. If the appraisal comes in lower than a certain amount, then you have by right of a financing addendum to say, "Hey, we can either back out of this deal or we're going to have to negotiate the price again because we thought the appraisal was going to come in at 285 and it didn't. It came in at 280. So now we need to negotiate again." So you can negotiate on the inspection items after you're in the contract and after you're in the contract, you can negotiate on the appraisal value if it comes in lower than expected. So more than one round of negotiation. Let's put all this in a big example so you can see it and how it flows. And then I'm going to give you a word of caution at the very end. So don't miss that, please. Okay. So let's take the example of a the $300,000 house that you want to make an offer on. Right? Under normal circumstances, if you put an offer in at 285, your cash to close, the check you're going to write at closing, it's going to be about $21,000 for everything. Okay? Now, if we can negotiate, well, we come in at 285. We're asking for and we get $6,000 of seller concession. We ask them to pay for the title, which is about $1,500 savings. We ask them to pay for the home warranty, first year home warranty, $600. And then, as we said, during the inspection period, we find out there's faulty wiring. We do a second round of negotiation, and we get four more,000 back with them at closing. So, your $21,000 check you were going to write has now been reduced to $8,900 after you subtract all those negotiated items. Not bad at all. And of course, you've got that $285,000 home. So, that's how it flows typically. And as a word of caution, let me just tell you this. If you like the house, if you love the house, do not get too emotionally gripped in terms of trying to get a certain price. Don't dig in and say, "Well, if I don't get it at 280, well then we just can't do the deal." Don't try to win. The big win is getting the house that you really love. a couple thousand dollars here and there over a 30 year or over a 10 year lifespan is nothing compared to the enjoyment day after day of being in that neighborhood, being in that home, being in the circumstances that you really want. So, I see so many home so many home buyers, a home negotiation will break down because they either have pride because they're trying to hit a certain number or they feel like the seller's not doing them, you know, a favor. So, let an experienced agent like myself walk you through all this and negotiate on your behalf. Either as I can do it as the loan officer as well in working with your agent to help them structure this properly. We want to do it in a way that doesn't insult the seller and yet gives you the upper hand along the way as you go knowing what that final outcome is going to be. So, I hope if all this was a great meaning, uh, great benefit to you. I'm the mortgage patriot, Kevin Fagen, on your side. Make it a great one. END OF TRANSCRIPT