Buyers have faced stiff competition for the last couple of years in the housing market. There has been a huge demand for homes, but not enough homes on the market to meet that demand. As a first-time buyer, this can be an intimidating market to jump into. But the good news is that the market has begun to cool. There are more opportunities for buyers and more room for first-time buyers to enter the market. Buyers are even finding that they have more opportunities to negotiate than they have recently. If you’re a first-time homebuyer, then this is what you need to know about negotiating your home purchase.
The market is changing
First of all, buyers should be aware that the market is beginning to change. Mortgage rates have risen and home prices continue to make gains. This has dampened the frenzy that has characterized the market during the pandemic. Home sales are down, making it easier for buyers to negotiate.
You can make an offer below the asking price
Just a few months ago, it was not uncommon for a seller to receive multiple offers above the asking price. But as the market changes, more sellers may be willing to make deals. As a first-time homebuyer, pay attention to how long a home has been on the market. You should also look for homes that have reduced their asking prices. These are both good indications that you may be successful in submitting an offer below the asking price. Work with your agent to determine a price that makes sense for your local market.
Insist on a home inspection
One tactic that serious buyers were using to make a winning offer was to waive the home inspection contingency. Fortunately, the market has shifted enough in recent months that buyers can once again feel comfortable insisting on a home inspection as part of the deal. If you waive the inspection, then you could potentially be on the hook for thousands or even tens of thousands of dollars of needed repairs on a home. It is in your best interest to insist on a home inspection, and in this market, you’re more likely to receive it.
Don’t rule out other contingencies
Contingencies are certain conditions that must be met for a home sale to go through. As we said above, many buyers over the last two years have waived important contingencies in their desperation to buy a home. In addition to not waiving the home inspection contingency, you can also ask to include an appraisal contingency. When you buy a home with a loan, the lender will perform an appraisal to determine the value of the property. But what happens if the appraisal comes in lower than the price you have offered the seller? If you have an appraisal contingency, you’ll be able to walk out of the deal or renegotiate the selling price with no penalties.
Consider closing costs
Finally, as a first-time buyer, you can consider asking the seller to contribute to the closing costs of the home. Closing costs are typically anywhere from three to seven percent of the home price. Many motivated sellers will be willing to pay for some or even all of the closing costs, so it’s worth asking.