After many hours of searching, you have finally found your dream home! You’ve toured the house, imagined your family making meals together in the kitchen. Envisioned where you’ll plant your vegetable garden as the kids play in the spacious backyard. The only thing missing from this dream home is your name on the title! It’s time for negotiations to begin – this is a big step!
You’re already attached to this lovely property and don’t want to lose it. This journey is so exciting and of course, can be stressful and confusing. Not to fear! 23 Legal understands the common hurdles that prospective time buyers face when acquiring their new home.
Follow attorney Ben Weaver’s 8 steps and pro tips for setting yourself up for success when negotiating on your dream property and to make sure you get the best deal possible…
8 Steps for Negotiating on Your New Home
1. Have a Budget Game Plan! Before placing any financial bids or taking out any loans, spend some time organizing your financial situation. Carefully calculate how much you have to spend on a potential home right now. A simple way to figure out your spending budget is by reviewing a few of your primary financial statements. For example: your household income, monthly debts (unpaid student loans, car notes and credit card bills) and last but not least how much available money you have in your savings account for a down payment on a home.
“One of the easiest ways to calculate your homebuying budget is the 28% rule, which dictates that your mortgage shouldn’t be more than 28% of your gross income each month.” Investopedia
Once you have an idea of what you can spend you, now have a home buying budget. This budget gives you the ability to narrow down potential homes with a controlled spending range. This awesome step will reduce the chance of purchasing a home you really cannot afford and lower the risk of future foreclosure. Curious about mortgages? Read our blog Everything You Need to Know About Mortgages This Year!
2. Be Ready with a Preapproval Letter! This is a very practical step after determining your financial budget. Preapproved letters are a prequalification document that gives an estimate of a loan amount a lender is willing to give you at this time. This document is based on your current financial standings. Majority of Preapproved letters are derived from your credit scores, W-2’s, and bank statements. These official documents are great for showing sellers just how serious you are about purchasing a home once you place a bid.
3. Placing Your Bid on the New Home: Now that you have an established Preapproved letter, you can place a bid on your dream home! A bid is a financial offer to the seller of the home you are trying to buy. This helps a lot, especially if the home you’re bidding on has caught the eye of other prospective buyers. When bidding, it’s VERY important to choose the amount of your initial bid wisely. Your attorney and realtor can advise you on the right amount to propose first. Bidding too low can have you cut from the running right away. Jumping too high on an opening bid may cause you to lose a lot of money in the long run.
“Considering your finances is also important. No matter how much you want a home, don’t offer over the listing price if you can’t afford it (or you’re not approved for a mortgage loan of that size).” The Balance
When placing your bid, it’s important to have a real estate attorney like Ben Weaver draft an official bid on the property. When your financial ducks are in a row, the process of bidding will hopefully lead to negotiations of terms. These are back and forth decisions on the purchasing the property. Your attorney will need to guide you through this sometimes challenging process of home buying and give you specific pointers from their years of expertise!
4. Hire a Reputable Inspector: After the seller accepts your bid on the property, the process of actually purchasing the home begins! The buyer (you) hires an inspector to create an inspection report for all those involved. Sometimes the bank/lender requests certain types of inspections specific to the loan you are getting for the property. However, most inspections are generally a standard review of the inside and outside of the home. This inspection will show what things do and don’t work on the property. If there are any major health concerns (such as mold, cracks in the foundation and any possible property damage that needs to be fixed beforehand) the bank will move forward with the loan for purchase. It’s also wise to choose the right inspector. Ask your Real Estate Attorney and Realtor for reliable inspectors they’ve worked with in the past. Attorney Ben Weaver has positive, long standing relationships with local inspectors he can recommend to you.
“You’re looking for someone with outstanding recommendations and also someone who has the basics covered like errors and omissions and general liability insurance. Additionally, you want to make sure the inspector you choose doesn’t have a track record for being unreasonable. There’s not one single house that doesn’t have issues; a smart inspector knows what’s a big deal versus what’s not. Essentially, you don’t want someone who’s going to highlight every single detail as a major problem.” Allentate
5. Repairs May Cost You…Or Save You Money: Once the report is made, the buyer and seller must review the findings of the inspection. This is a key negotiation moment, If there are a substantial amount of repairs needed on the property, your attorney will help you to draft a list of repairs that must be done before the closing. Some sellers choose to lower the value of the property if they don’t have the time or the money to fix everything on the requested list your attorney sends. As stated before, some banks/lenders will choose not to give a loan if the property doesn’t get up to code with repairs. There are a range of financial negotiations that can happen based on repairs. In some cases, the closing costs can be on the seller as a way to wave not being able to meet the list of repairs. This is why it’s tremendously important to have an attorney review your inspection report as well as correspond between you and the seller.
6. Mark Your Calendar: Next step is acquiring a closing date! While the negotiations may still be in full swing, you might need to move into the property sooner than expected. For a wide range of reasons like your lease on your apartment is running out and you need to be able to move into your new home within the next few months, your attorney can step in and push for a quick closing date to accomodate your needs. Real estate attorneys can help to keep the moving timeline on track, as well as keep the sale of the property from hitting a stalemate.
7. Determining Closing Costs: Remember when we shared that knowing your finances is extremely important when it comes to buying a home? That’s because as a buyer you have a large amount of financial responsibility to consider outside of your down payment on the home.
Rocket Mortgage breaks down how closing costs can affect your wallet:
“Closing costs on a home purchase are usually between 3% – 6% of your total loan value. For example, closing on a $150,000 loan means you can expect to pay between $4,500 – $9,000 in closing costs. This means that these fees can potentially present a significant barrier between you and your home purchase.”
8. Create a List of Contingencies: Having a Real Estate Attorney who is attentive to your case and family’s needs is a great way to prevent being “blocked” from closing on your home due to closing costs. Most people are unaware of the fact that their attorney can request the seller help pay for closing costs! There are numerous factors that can determine how much the seller actually chips in, some being connected to the inspection report, others can even be for the sake of the swiftness of the sale itself. Closing contingencies can be requested outside of the price of your home! Don’t be afraid to ask for what you want, you may be pleasantly surprised by the other party’s willingness.
“Ben was excellent with all the help and advice while buying a home. He made the process really easy. Definitely recommend him for your next home buying.”
– DP (Client Testimonial)
A few bonus tips to keep in mind…
The More You Know: The more information you have about the seller and property history the better! Be on the lookout for small details from the seller. For example, if the seller is a couple retiring and planning to move to a warmer climate, they may want to sell the property quickly. Especially if the weather during the sale is non conducive for them. The ability to close on a property quickly prevents unwanted challenges like another buyer approaching the seller.
Having your attorney lock a seller into an agreement to sell is always your best option. Another example is a dual real estate sale, the seller is using the sale of the home you’re buying to finance the purchase of their future home. These bits of information give you some leverage when it comes to negotiations. The history of the property itself is also something to be aware of. When you walk through with your Realtor or when you review the inspection report, look out for notes like “potential flooding” or “previous damage to property”. There is nothing wrong with asking a lot of questions. If you want more information on the home, you can also ask your attorney to request it directly from the seller or the Realtor selling the property.
Don’t Be Afraid to Walk Away: Buying your first home can be a challenging experience with unexpected obstacles. When a seller is not as cooperative as possible and red flags keep popping up, you may want to consider walking away from the deal. And that’s very common! Some sellers may have multiple bids on their property and are attempting to drive the price up on the home. Your lawyer’s job is to look out for these red flags. It’s one thing to budge a little financially over your budgeted price for your dream home, but it’s another thing entirely to potentially put yourself in financial crisis to obtain a home you can’t afford. Furthermore if the seller won’t meet your repairs or the home itself is more of a fixer upper than you can manage, you may want to cut your losses ASAP!
“One common reason to rip up a real estate contract is if the home inspection uncovers bad things, such as a crumbling foundation, mold and water-related issues, or shoddy workmanship. Or if the seller won’t agree to pay for pricey repairs of needed fixes.” USA Today
This is why it’s vital to hire a trustworthy attorney who has your best interests in mind. Ben Weaver has been in these types of situations where he had to advise his clients to think of the bigger picture. It can be a tough choice to make, but once you find the home that is actually right for your family, you’ll be grateful you made the tough decision to walk away from an over complicated legal situation.
“Ben was referred to us by our realtor and we couldn’t be happier with his services. His rates were great and his level of service was even better. He’s very professional, knowledgeable, and quickly addressed all of our emails and calls. I am definitely going to recommend him to my friends and family.” – Andrew C. (Client Testimonial)
Attorney Ben Weaver is happy to guide you through the process of buying a new home this year!
Buying a home can be an overwhelming process – especially for first time homebuyers. Having an experienced attorney by your side every step of the negotiation process is a very wise investment and will make the journey much more enjoyable!
Ready to work with a lawyer who truly cares about his clients and listens to your needs? You won’t regret having a trusted attorney like Ben Weaver to guide you through this exciting new chapter!
We encourage you to contact us for assistance or with any questions you have. Click here to read 5-star client reviews!
Why Choose 23 Legal
23 Legal offers Real Estate and Estate Planning legal services to individuals, families, community associations and small business owners throughout Chicagoland. We know how intimidating “the law” can be. In fact, when most people think of law offices, they think of stuffy leather chairs, huge wooden desks and pompous lawyers who charge outrageous fees. That’s not us! We believe in 1-to-1; the same lawyer should work with you all the way through. Whether you have an estate planning issue, family trust concern, or you have a legal problem in regard to a new home, business, real estate or remodel, you need a lawyer who cares. That’s where Ben comes in! We are great listeners; more than that, we are lawyers who believe that our clients always come first.