Real Estate Negotiation Tips for First Time Home Buyers

Welcome back, future homebuyers! The homebuying process can seem overwhelming, but it can be fun and exciting with the right guidance and investing the time to learn! First-time homebuyers Adrian and Nicole discovered that knowledge is power, and with each step forward, they gain comfort and confidence in their home-buying decisions.

So far, Adrian & Nicole have built upon each lesson as they learn more about buying their new home. Here's a quick recap of where they've been and where they are going next. They gained an understanding of the real estate process through their home buyer discovery meeting and learned the ins and outs of applying for a home loan.  

The knowledge they gained in the first two steps set Adrian and Nacole up for success by helping them gain clarity and visualize what the right home looks like for them and their growing family. When the time came to go house hunting, they were in the best position to win by knowing what they were looking for in their new home and having their mortgage pre-approval letter in hand. Now, it's time for them to make an offer on the right place to call home. 

In this post (and the video below), you'll join Adrian and Nacole as they learn about real estate negotiations and smart strategies for making an offer on the house they hope will become their new family home.

Let's break down the key details of making an offer on a house into manageable steps, providing you with a clear roadmap to follow. 

Forget the List Price, What's the Home Really Worth?

The first step is assessing the value of the home.  As I did with Adrian & Nacole in the above video, your realtor should perform a comparative market analysis (CMA) to determine the estimated fair market value. 

Ultimately, a home's worth depends on the price a buyer is willing to offer and the price a seller will accept. That said, an appraisal will be performed during the closing process if you're using a home loan. The price the appraiser determines will be the home loan amount you can receive for that property, even if your home loan pre-approval letter is for more. 

To minimize heartache and hedge the odds in your favor, work with your realtor to determine a solid offer price based on real estate market conditions, including market trends, indicators, and overall market conditions. 

Review Your Real Estate Contingency Periods

When buying a house, a real estate contingency provides you with a clause that protects your best interest and allows you to cancel the purchase agreement within a certain amount of time per contingency if the condition is not met. Contingencies are often considered milestones in the closing process. 

Common real estate contingencies include buyer's due diligence, home inspection, appraisal, title search, financing, and review of homeowners association (HOA) documents, often simply called "CC&Rs."  CC&Rs is an abbreviation for "Covenants, Conditions, and Restrictions." (Learn more about real estate terms)

Chat with your realtor about the real estate contingencies available to you when you write an offer. Knowing what to expect moving forward will massively benefit you during the closing process, aka escrow.

Common Real Estate Contingencies Explained

To better ensure your success, let's review the common real estate contingencies a bit deeper. 

Buyer Due Diligence: Provides a homebuyer with a certain amount of time to verify if a property meets their expectations. During the due diligence period, a seller will provide seller disclosures, and a home inspection is scheduled, including any additional non-invasive inspections a buyer would like to perform.  A buyer pays for any inspections they have performed. 

Home Inspection: Homebuyers reserve the option to have a general home inspection and any other inspections they choose. My professional advice is always to perform a home inspection to determine the property's condition. Did you know that 17 types of home inspections exist? 

Appraisal:  Simply put, an appraisal is an unbiased opinion of a home's value by a certified residential appraiser. Appraisals are required if a buyer uses a home loan but not if a buyer pays cash for a property. The amount an appraiser values a property for will be the amount of a home loan a buyer can get for the purchase.  When you buy a house, the real estate market conditions will affect any potential price re-negotiations if needed due to the appraised value being less than the offer price.  

Title Search:  This is an official examination of public property records and recorded instruments to determine and confirm a property's legal ownership through a particular chain of title. Many layers are involved in this comprehensive process, including reviewing deeds, tax liens, land records, court judgments, easements, and more. 

Financing Contingency:  This clause, also called a "mortgage contingency," allows a buyer to cancel a purchase agreement (offer) within a certain amount of time without penalty and receive a refund of their earn-money deposit if they cannot secure a home loan.  

HOA CC&Rs:  In Nevada, a buyer has 5 days right of recession from the date of receipt of the HOA CC&Rs to review and comply or to cancel a deal.

BONUS TIP: Ways to Write an Offer

Writing an offer on your new home is exciting!  Ideally, you'd meet with your realtor in person to write your offer.  However, as a full-time realtor in Las Vegas, NV, I've found that meeting in person to write an offer seldom happens.  So that begs the question, how do I write an offer? 

Great question!  In short, 4 options exist depending on your comfort level. 

  1. Meet with your realtor following your home tour to write an offer in person.
  2. Call your agent after thinking over an offer and inform your realtor what you have in mind for your offer. 
  3. Use digital signing software like Authentisign, DocuSign, and Hellosign to review and sign your offer. 
  4. Hop on a video call/Zoom meeting to discuss your offer with your realtor. 

Employing a mixture of the approaches above is very common. That's why having a great working relationship and effective communication with your realtor is essential. Take some time to find the right realtor for you. Doing so will save you time, energy, money, and heartache. 

Next Up

I love seeing the progress Adrian & Nacole are making as they move through their home-buying process. What stands out the most in your mind?  

Next, we'll continue with Adrian and Nacole's pursuit of the American Dream of owning a home by diving deeper into buyer due diligence in real estate. 

If you're planning on buying a home and would like the same compassion, expertise, and attention Adrian & Nacole received, please feel free to contact Andrew Finney for more details.  

Until next time, peace be with you!

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