Home, Uncategorized

How To Buy A Used House

You’ll find everything you need to know to come out ahead when buying a used home, including negotiating tips, scams and pitfalls to avoid, where to buy, where not to buy, and legal tips. We’ll also cover how to choose a good real estate agent. Many concepts here can apply to homes and condos, or any other big purchase.

Be sure to get your credit score before you shop for a house

Everyone has a credit score calculated at the time your credit report is requested. It’s based on over 100 different proprietary variables and algorithms developed by Fair Isaac (FICO). The range is 300 to 850. You can get your credit score from Experian or Equifax Score Power Most lenders consider people above 650 to be prime borrowers, meaning they will most likely be approved at favorable rates.

Every person you come in contact with wants to sell you something.

Don’t you dare think that anyone you’ll come in contact with is looking out for your best interest. Every person you come in contact with wants to sell you something. That’s their job, their #1 priority. Your happiness is 2nd to their mission statement. Once you overcome this common naive mistake that most home buyers make, you’ll be able to make much better informed decisions that will save you the most money.

Just because you are approved for $200,000 does not mean you have to spend that much. If you can get a great house for much less than you are approved for, then that is the best move financially for you. There is no rule that says you have to spend the max, although most people finance on the outer fringes of their ability to sustain the payments. Don’t let your agent try to qualify you for more than you are comfortable spending. They act like they are doing you a favor. They’ll tell you “Oh, I can get you approved for a higher mortgage through my banking contacts”.
Translation: “I want to sell you a more expensive house and get a higher commission. Buying a more expensive house does not always mean it’s better, it just costs more.” Your credit score will be used against you, so find out what it is. The “merged comprehensive reports from the big 3 credit bureaus” are the ones to get, from sites like Experian and Equifax Score Power.

Common Home Buyer Mistakes

Many home buyers mistakenly think that they are protected by using a “Buyer’s Agent”, or a mortgage broker who will “find them the best mortgage”. When I ask them who is paying the buyer’s agent, they respond with “They just get a percentage of the sales price”. OK, and how is this different from a seller’s agent? You can put a sheep’s clothing over a wolf, but it’s still a wolf. The higher the selling price of the house, the more commissions are earned by the seller’s and buyer’s agents. Another common mistake home buyers make is thinking the price in writing is set in stone. The pen is mightier than the sword and sellers use it to their advantage when selling houses. But you can bypass this common buyer’s mistake by adopting a counter intuitive method of thinking. Just remember this one important rule:

Sellers do not set the price, it’s the buyers who set the price

How many times have you sold or traded in a used car and not gotten anywhere near what you wanted for it? This is because you thought you could set the market, but the market told you otherwise. Whether it’s a house or a car, the market sets the price, not the seller. Once you get past this mental roadblock, you’ll find it much easier to offer much less than the asking price. The stock market is a good example. If you were unfortunate enough to buy the over hyped $150 “dot bomb” stocks in early 2000, you soon found they were selling under $1. Although you wanted $150 when you sold them, no one wanted your shares, and you suffered a huge loss. Houses are the same and many sellers are under the wrong impression that real estate must appreciate. There are no rules of what appreciates or depreciates. So don’t be bashful about offering a low price on a house. Some homeowners who are selling their homes get the idea in their head that their house should sell for say $200,000 because they bought it a few years ago for $175,000.The seller may become indignant when you present them with a low ball offer. They may have bought the house when the market was hot, and in a soft market, their house may not be worth the asking price.

During the dot com rush of 1998-2000, many homes in Silicon Valley sold the day they went on the market, selling for much more than the asking price, thanks to foolish buyers and bidding wars. See my point? The buyers set the selling price, not the sellers. People were shelling out $500,000 for tiny 2 bedroom 2 bath, one car garage “doll houses” that you and I would never consider living in at all. When the dot coms became dot bombs in 2000-2001 and layoffs were in full swing, it took weeks to sell their homes, and many people took a bath on the resale. Sellers often got thousands more than their high asking price thanks to idiot buyers caught up in bidding wars.

By nature, us foolish humans have a hard time dealing with the fact that our property might be worth less than we paid for it. In overdeveloped areas, houses can lose their value rapidly, and you can use this to your advantage when buying a recently built home. One area of Pembroke Pines, Florida was bursting with development for a few years straight. People selling homes they bought new 2 years before were losing $20,000 on the sale of their homes because they were competing with all the new construction nearby. Buyers bypassed 2-3 year old houses for brand new homes with better amenities and updated building codes for the same price or slightly higher.


You cannot guarantee impartiality

Anytime your real estate agent’s commission is based on the selling price of the house, you cannot guarantee that the agent has your best interest at heart. The only way to guarantee that is to pay a large fee to a real buyer’s agent, and they don’t get any percentage of the selling price. That fee however, removes the benefit of bypassing the commissioned real estate agent in the first place. Never tell anyone but yourself how high you are willing to go. By law the seller’s real estate agent has a fiduciary responsibility to the seller, and they WILL tell the seller everything you say, so pretend you are in a police interrogation. The agent will ask you how high you are willing to go on the house. Don’t fall for this trick. Just give them the price you want to pay for the house and if they ask how high you are willing to go, tell them that’s it.

Don’t buy a house in an urgent rush

Don’t wait until the day you have to move out of your old house or get transferred to buy a house. You need time to carefully plan your purchase. It can take 2 months or more to get an agent, shop for the house, get approved for a mortgage, and close escrow. If you know you will be relocating and need a house soon, you should start looking now, because you don’t want to be pushed up against a wall and forced into making costly and hasty decisions with adverse financial ramifications that will come back to haunt you. If your car is dying, you’ll be forced into making hasty decisions and signing deals you should never have signed. Never let a dealer know you are desperate for a car. If the sellers know you are desperate to get a house soon, they will not drop the price. This little mistake can cost you thousands. Always make the sellers think you have plenty of time and resources to analyze each deal carefully. Make sure they know you are the one that they have to chase. then the deal will proceed on your terms, not theirs.

Path To Buying A Used Home:

  • Get organized, pay debts, get your Credit Report, clean your credit report.
  • Read real estate classifieds, free real estate magazines, web home searches.
  • Get a good book on home buying, and get a good real estate agent.
  • Secure financing and pre-qualify for a mortgage.
  • Select a home to buy using tips found here on HouseBuyingTips.com
  • Choose a good real estate lawyer
  • Negotiate tough with the seller, begin escrow, sign a preliminary contract.
  • Shop for homeowner’s insurance.
  • Have the house inspected by a professional engineering firm.
  • If inspection and financing are OK, buy the house.
  • Close escrow, and move in. Live in the house with no furniture for 2 years.

Be sure to organize all the files you’ll need for a home loan

Read our chapter: Organize Your Files Before Applying For A Home Mortgage. You never want to be caught without the paperwork the lender needs to approve your mortgage. Each missing item will delay your home loan approval. It’s better to over deliver with more than you think they will need, and have it well organized and ready to go. You’ll find everything you need to organize before you apply for a home loan, and how to get your Credit Report and clean it. You’ll find tips on files and paperwork to have ready to increase your chances of getting approved for a home mortgage.

First time buyer jitters.

Don’t be afraid to pull the trigger. Your agent brought you to a house that matches your criteria, the price is right, it’s a good neighborhood, don’t get cold feet and start making up stupid little reasons not to buy, just because you are scared, you could be missing out on a home that appreciates and gives you years of happiness. We all go through these feelings on our first purchase and you must not let it take over.

Financing Tips

In our chapter on How To Finance A Home you will find plenty of tips and scams to avoid when financing a house. We explain all the different types of financing available and the scams you need to avoid. Make sure you know how much of a home mortgage you qualify for before you even start looking. You don’t want to waste your time, or a real estate agent’s time, looking at houses that you can’t afford.

Many home buying books and experts tell you to drive through neighborhoods looking for houses for sale. We don’t agree with that method. How do you get into the gated communities? Also, some communities do not allow sellers to post “For Sale” signs in their yard, or on any windows. Your time is more efficiently spent searching online real estate classifieds. You could find more houses listed in an area in 5 minutes online than you could driving by all day. You might even find more candidates than your agent, especially if the sales price or commission rates are low. Online real estate classifieds are the most efficient way to find a house, and allows you the home buyer to double up the work that your real estate agent is doing.

Biggest complaint of online used home classifieds

Stale listings. A house sold 6 months ago can still be listed on the web site. Even the big Real estate agents are guilty. This is particularly a problem on sites where houses are for sale by owner (FSOB), as sellers don’t go back to remove the listings. Some sites have photos, some don’t. Often you’ll get an MLS printout on a house, and you’ll often see most of the fields describing bedrooms, view, the amenities, the homeowner association information, etc., are left blank. The seller’s listing agents don’t take the time to enter enough data about the house to allow you to make any kind of decision about wasting your time to look at it. Perhaps that’s just how they want it.

Choosing A Good Real Estate Agent

The better agents have success selling homes in the neighborhood you are looking in. Real estate agents often have a full page ad in the local home classified magazines listing houses grouped in one area. Successful agents have lots of houses listed. Part timers and unsuccessful agents have few if any homes listed. Probably the best source is people you know. They will tell you if they liked or hated their real estate agent. We had an agent who sold my grandmother’s condo and she was a true professional who had it sold within 8 weeks of listing, even though the president of the condo homeowners association did everything humanly possible to withhold required paperwork and thwart the sale. You want a real estate agent who is professional, aggressive, and maybe wins the monthly sales awards in her office. The large well funded real estate companies have certain minimum standards for business practices, ethics, and customer satisfaction. You’ll still find bad apples at the larger firms, but maybe not as many as you would in small unaffiliated brokerage offices. Ask the real estate agent to show you all the state required disclosure forms so you know ahead of time all your rights. You don’t want any surprises later on.

House buying tips fact: No real estate agent, no matter how good they are, will work as hard as you at finding a property. There’s simply too much to do and they have other clients as well. You need to spend hours yourself on the best web sites to find listings also. You’re about to spend over $100,000. Don’t just leave it in the hands of the person who makes a commission by selling you that house. Help your real estate agent help you. By time the real estate agent emails you the information on the house, it can be sold already, because the good homes sell fast. You are not the only buyer looking to get into that great neighborhood. Do you really think they will tell you about a nice house they just found for you that was priced $15,000 less than you told them you are willing to pay? Yeah, right.

It’s also your responsibility too. You should be mining all the data from the web sites and choosing houses you want to visit, and weeding out the others. This will save your time and the agent’s time by avoiding driving to every house on the list, and not liking any of them. This will help keep a b relationship between you and your agent, and they won’t get as frustrated that you are not buying.

If you are buying a house instead of selling, you really don’t need a real estate agent. Besides, the biggest complaint we hear from home buyers is the real estate agents they hire continuously try to get them to buy houses for much more than they told the agents that they wanted to pay. One person we know specifically told his agents $160k was the top limit. But the agents kept dragging them to homes priced at $180k. In fact several agents did this and the buyer fired all of them, and found the house on their own on the Internet, even after the real estate agents lied and said there were no homes available in their price range. You are at their mercy, if they don’t want you to know your house is out there, they won’t tell you. The only tasks a Real Estate Agent performs for a home buyer is closing escrow, and if they are any useful at all, they look up what houses to buy, and possibly check out school rankings for you. But many savvy consumers can do all this themselves with online sites. Then just use a property attorney to handle the closing. For many more detailed tips on choosing and working with real estate agents.

Get Yourself A Good Book On Home Buying

Before buying a house, get a book on home buying tips & home finance. The best one is Tips And Traps When Buying A Home. This thorough, easy to read book covers the topics you’ll need to be a winner when buying your home. America’s leading real estate authority gives you Tips and Traps when home buying, how to check out neighborhoods for school quality, crime rate, appreciation. Learn how to deal with brokers, lawyers, inspectors, questions to ask, negotiating tips, how to make a low offer the seller will accept, tips on home loans, and saving on closing costs. Read this book and you won’t be misled by sellers, agents or anyone in the costliest transaction of your life. It’s the best house buying resource to have if you’re still in the dark on house buying.

The best time to buy a used house is..

Most people buy a house in the summer time, because they have kids and that’s the best time to make a clean break from the old house and into a new one before the school season starts. But it’s the worst time for you to get a good deal because that’s when demand is at its peak. Chances are you’ll face more competition for the same house in the summertime than you will in the winter. Most people don’t pack up in the middle of Christmas and move to another home. Sellers trying to unload their home in December will have a real tough time of it, especially if there is snow, and you need to exploit those opportunities. I would bet that you’ll get some really good deals around Christmas time, because no one is looking at houses then.

Houses To Avoid

  • Backed up to a shopping center or land that is zoned for business.
  • Backed up to a street with lots of traffic. You’ll hear it at night.
  • Houses that have any kind of flat roof, for example on a room addition.
  • The biggest, most expensive house on the block.
  • Next door to a renter. Renters treat the house and yard like crap.
  • A house with chipped paint, or a damaged roof.
  • Avoid any house that you did not have a home inspection firm review.
  • In an area that puts your kid in a bad school, or far from their school.
  • In a noisy area like an airport or other industrial area.
  • In a high crime area, that you drive through would have to get home.
  • In a neighborhood with high homeowners association maintenance fees.
  • In an area prone to flooding when it rains. Visit the house when it’s raining.
  • A house with only one bathroom. It’s very difficult to resell.
  • In or near a 15 MPH school zone.
  • Neighborhoods with no code enforcement: boats, commercial vans, etc.
  • A house with no central air conditioning, or central heating.
  • In northern states, a house without a fireplace.
  • On a steep hill. This can be a problem in icy winters in northern states.
  • Overpriced “premium view” lots. If you can’t get a decent price, don’t buy.
  • Only has a one car garage or a carport. These will be hard to sell.
  • In a neighborhood where property values have not increased much.
  • 2 bedroom, 2 bath homes are a lot harder to resell than 3 bedroom, 2 bath.
  • You don’t want a house with a tiny master bedroom or tiny closets.
  • A weird architectural design that you’ll have a hard time selling later.
  • Anywhere within 2 miles of a landfill, or near a water treatment plant.
  • Close to the beginning of the block. You’ll get all the traffic.
  • The lot that gets headlights of all the cars turning onto the street at night.
  • Corner lot near the entrance to your street. You’ll get tracks in your lawn.
  • On a street that’s hard to get in and out of, i.e., long traffic light, or busy intersection, or a street that you have
  • to drive past and make a U-turn.
  • On a golf course. Expect broken windows. Some people love it, some don’t.

Tips for avoiding a neighborhood with bad construction problems

Interview residents in the neighborhood, and ask if there has been any problems affecting the neighborhood. You’d be surprised at what off the wall issues could surface. We’ve seen strange ones like nearby home construction blasting cracking homeowners walls and foundations. We’ve heard of builders developing communities on top of tire dumps and the owners find out years later when the whole neighborhood starts to fall apart. This list goes on, like wide shoddy construction lawsuits, illegal chemical dumps, etc. These are not farfetched, and believe me if there is something major like that going on, you don’t want to be anywhere near that neighborhood. Angry residents will be more than glad to tell you of any problems in the neighborhood.

Construction Issues To Be Aware Of

In hurricane states, find out if the house is CBS (Cement Block). Often they label a house as CBS, but the CBS is only on the first floor. The upstairs could be wood frame, and Hurricane Andrew has already proved that this does not hold up. In Florida you want your 2 story house to be CBS on both floors. We prefer CBS materials for exterior walls in Florida and other hurricane states.

Avoid houses that have any kind of flat roof. Remodeling was popular in the 70-80’s, it was easy to add on a back room, and give it a flat roof. Houses with flat roofs leak. No matter what they tell you or what seal is on it, if the roof is flat you will have standing water and it will leak, and it takes a massive amount of money to change the pitch and fix it. Even though it looks like its OK, its a ticking time bomb.

Check the house out in the rain, and see if the neighborhood floods easily. Don’t rely on your real estate agent to show you all the houses that fit your criteria, you can bet that they are not showing you the homes with only 5% commission.

Try to find out how long the house has been on the market

There must be a reason why the house has not sold if it’s longer than 6 months and you are not in a bear market. Pin them down and ask why. If the house has been on the market a long time, there must be a reason. Use this to your advantage.

The appraisal

When getting the house appraised, be aware that you are at the mercy of the appraiser. Some mortgages don’t acknowledge all the land your property is on so it may have to be sectioned off and evaluated according to the mortgage rules. You could buy a house on 14 acres and the mortgage only looks at the first 5 acres so you’ll need it appraised on the 5 acres. If your house is not finished and there are any incomplete rooms they might not be counted as rooms, which can lower an appraisal.

You’ll get 10 different appraisals from 10 different people. The real value of the house is what you the buyer are willing to pay. Don’t let them cram existing standards down your throat, to Jedi mind trick you into paying more than you should. You have the final say. You must be aggressive and fight for every dollar, just like they are doing to you. Compare this to stock analysts who tell you to buy a stock now because it’s worth a certain amount in the next few months. Often they too are wrong, because no one can accurately predict how much buyers will pay a few months from now. What if the job market crashes next month? All the valuations the appraisers made on your home just went out the window because lots of people will get kicked out of their homes and be forced to sell. Appraisers don’t take cause and effect into account, they base everything off what happened yesterday.

warning tips for buying a house

The appraisal on the house you are about to buy is most likely done by a property appraiser with a cushy relationship with the seller’s listing agent.

Foreclosures might save you some money

And they also might not save you any money at all. I don’t know what it is about foreclosures that make the previous owner go crazy. They usually do stupid things to the house out of spite. We’ve seen houses with all the electrical outlets removed, ceiling fans torn down, you name it. A friend of ours looked at a few foreclosures and they were not bargains at all. Some were only $2000 less than the surrounding homes, for a houses that will require about $10,000 to fix it back up. In one house our friend saw the toilet had been smashed and cracked by the previous owner, and the water heater was ripped from wall. One plumber he spoke to said in one house the soon to be foreclosed owners poured concrete in the upstairs toilet, and the walls had to be gutted to get to all of it Be real careful with foreclosures, because you don’t know all the damage that was done. You absolutely must have an inspection firm check out the house first. Just remember any foreclosure that is a good deal, is already gone before you get to it. Savvy agents and investors circle like vultures and snap these listings right up.

Scams To Watch Out For

  • Often times the listing Real Estate Agent uses too much poetic license and embellishes the description of the house. In one case one of our visitors reported the listing described “hardwood floors”, but it was cheap plastic imitation wood, only in one room. Don’t believe anything you read until you see it in person.
  • The Real Estate Agent tries to get you to sign a release of liability form, for example when your home is built near a landfill. They claim the water is good now, but they are not to be held responsible for what happens later.
  • Don’t trust the seller’s “termite report”. Probably every house has termites. It’s just a matter of how much infestation there is. Get your own report.

Don’t overlook Homeowners Association (HOA) dues!

Check for homeowner association dues, how much they are, and if there are any assessments coming up. In some communities, monthly dues are $150 or more. They are called dues because you “DO” have to pay them, or they “DO” foreclose your property. In my grandparent’s condo there was a cocky, arrogant unit owner who thought he could skirt the law by not paying his monthly dues and told the board they can’t control him. But the day of his foreclosure hearing in court, he magically showed up in court with $4,000. Also, you have to obey strict rules and codes in an HOA. Many people have a natural resistance to authority. If you violate the rules, they can and will fine you and if you don’t pay these fines, they will drag you into foreclosure court. Once in a while you’ll see a newspaper article about how a $50 violation turned into $2000 of court cost for a defiant homeowner. If you live in a condominium, your guests must park in clearly marked legal guest spaces or they’ll get nasty hard to remove orange violation stickers placed on their windows by the condo commandos.

Many home buyers fail to take into account these monthly HOA fees which can really add up. Find out when the last increase was, and if there are additional increases on the horizon. Find out if there is a 2nd homeowners association. Some associations are small neighborhoods within a larger country club community and you pay dues to both. Meet with the homeowners association president and have them give you written copies of the current budget and monthly dues. By law they must give you this information. If they are hesitant, you should become suspicious of what they have to hide and forget about the neighborhood. Some country club communities can even require you to join the country club. If this happens, expect at least $50 per month for the most basic of memberships.

How often do HOA dues go up?

Some HOA’s are so poorly run that increases occur annually. Some like ours, have not increased in 7 years because the HOA board members know what they are doing. Problematic issues here in Florida include corruption on the board of directors, kickbacks from service vendors, and fund mismanagement, leading to higher monthly fees. In the 1990s, an HOA in Boca Raton had too many eggs in one basket and lost several hundred thousand dollars in a bank account of an SNL that folded. FDIC only insures you up to $100k. Oops! Many lawsuits were filed after that one.

Dig deep on details for HOA dues: What do they include?

Ask current residents how often the dues increase, and what is included. Some fees include basic cable TV, common area maintenance, pool maintenance, trash, sewer, water, etc. You need to find out exactly what you get for these monthly fees to determine if it is worth buying the house. Sometimes the description says it includes lawn maintenance. Is that just the common area lawns, or do they mow your lawn too? Some HOA dues cover both, but you need to find out for sure.
Types Of Houses You Want To Buy

  • The least expensive house in an upscale neighborhood.
  • On a golf course. The views are great. Some people love it, some don’t.
  • A house at the end of the block or a cul-de-sac. You’ll get less traffic.
  • Backed up to land that is zoned residential, or a forest, or water.
  • In a neighborhood that puts your kid in the best school.
  • Reasonably close to fire departments and hospitals.
  • Reasonably close to the grocery store or work.
  • No traffic or logistics problems getting in and out of your street.
  • High ceilings, large kitchen, walk in closets, office (higher resale value.)
  • At least a 2 car garage, 3 is preferable if you can afford it.
  • Has a paver brick driveway. Much nicer than standard blacktop.
  • Newer home, upgraded appliances, higher efficiency A/C, good insulation.
  • Has a nice pool in good condition. Make sure it’s fenced in.
  • Energy efficient home with the highest A/C SEER rating, insulation, etc.

Negotiating Tips For Home Buyers

The Negotiating Games

It’s like a debate. On one side are the seller and Real Estate Agent. On your side, is your Real Estate Agent or property attorney negotiating with the seller’s Real Estate Agent. The rules of this game are:

The sellers must convince you that the house is worth the asking price, and you must convince them that the house is not worth the asking price.
You must learn to adapt or be voted off the island. If they have a savvy Real Estate Agent working for them, the Real Estate Agent may show recent selling prices of homes in the area, which is the most widely accepted guide to pricing a house, along with the reports of a property appraiser. But it’s not gospel, they could have more rooms or different amenities than the house you are buying. But you should dig deep and question all the data they show you. They have selling prices of houses in the area. How long ago did those houses sell? If it was a year ago, you have just cause to tell the sellers that the data is worthless. It might as well be data from another state. If the market was hot a year ago, it might not be now, and all bets are off on the value of the house. Confuse the seller with these points to create reasonable doubt of the house value.

More importantly, you want to see the original listing prices of other homes before they sold. It will give you a great indication if the market is soft and you may be able to low ball the seller. For example, a house in the neighborhood you are looking at listed for $210,000, but sold for $175,000. If you knew that it listed that high before it sold, it’s a great indication that the market got weak and it’s a buyer’s market.

Here’s some negotiating tactics the seller’s Real Estate Agent might use on you:

“These other houses nearby sold for $300,000”

This is like taking credit for someone else’s work. While neighborhood pricing data is a good basis to start with, you need to convince the sellers that each house has it’s own intrinsic value, and just because a house 10 blocks away sold for $300,000, this does not mean the seller’s house is worth $300,000. Their house must earn it’s value. Also, just because other buyers paid a high price for surrounding homes, does not mean that it’s worth that much to you. Many times people over pay for a house.

“This is a gated community, the added safety is worth more”

Sure the gate acts as a deterrent, it keeps out the local kids driving by, but anyone can get past a gate by riding close to the car in front of them. People hop the wall all the time. Well known prestigious communities in Boca Raton have had high profile crimes and burglaries. In February, 2001, the Sun-Sentinel published an investigative report on gated communities from Palm Beach to Miami, and reported the crime rates were just as high inside the gated communities, as they were outside them. We know someone living in a gated community that had the wooden arms. One night several Corvettes were stolen in his neighborhood over the course of a few weeks. Many gated communities have slow moving gates that could allow a second car to easily sneak in behind the first car going through the gate. Some gated communities improve upon this by installing a second faster arm gate in front of the slower metal gate to prevent unwanted vehicles from riding the coat tails of the car in front. But often it is easily bypassed by people who wait at the keypad and act like they are pushing the buttons to dial their friend. A real homeowner shows up behind them and often gets out and scans their card through the reader to help the person get in. The best gated community is the patrolled community with a security guard at the main entrance. This of course costs more. So crimes do still occur, and you can use this to cast doubt on the sellers. Even if you are wrong, put them on the defensive.

For every point they bring up to convince you the house is worth more, you must come back with something to dilute it or discount their statement altogether. Do this on enough selling points and you win. Just keep lobbing grenades back at them and let the air out of their balloon. Keep telling them that the market is not baring, and their price is unrealistically high, otherwise they would have sold it already. You must convince them that they have a buyer right now, ready to go, pre qualified, financing won’t be an issue, and if they keep on trying to hold on to an unrealistic value, it will cost them more money in the long run in terms of extra mortgage payments.

Watch out for tactics like this one: “A buyer looked at this house today and is interested in making an offer.” Yeah, right. If they were really interested, the Real Estate Agent would have a deposit check already. This is one of the oldest tricks in the book.

Here’s some negotiating tactics you can use on the seller:

  • “Do you really want to accept another offer from another buyer?”
    Ask them what good is it to accept a higher offer from another buyer, if their financing falls through. Put the sellers on the defensive and ask them “how many more months of mortgage payments are you prepared to pay before you sell this house?” Remind them how many hundreds of dollars they’ll lose monthly to interest, insurance, and property taxes as the house sits there month after month, sucking money out of their pocket. Use those exact words. Show the sellers you are passive about the property, you could take it or leave it. You have other homes to make offers on that are better priced and served by a better school for your kids. Never let them see that you must have this property, it will put you at a big disadvantage.


  • “If the house is such a good deal, why hasn’t it sold yet?”
    Let’s face it, if you are able to be standing in the seller’s unsold home, it’s because it’s not sought after. Many times in the past we wanted to look at a particular house and it was sold days before we could get to see it. There are many savvy real estate agents and even savvier consumers busy searching all the Internet home sites and MLS with many tools to help them find great properties at great prices. If the house you are looking at is really a good property with a good price, it would have been sold long before you got there. Your Real Estate Agent would not even have told you about it, because he would have bought it himself. If the house you are looking at is even available for you to buy, you should question the value with the seller.


  • Use high maintenance fees to your advantage.
    If maintenance fees are high, this could be a bargaining point for you to drive the price of the house down. Just remember, if you are about to walk away, chances are a dozen other buyers already have and the sellers are probably beginning to panic. High fees can make the seller’s home difficult to sell.


  • The listing agent says “This house appraised for $225,000”
    I still say so what! Just because they appraised it at a value still does not mean you have to buy the house for that value. You can just walk away. That means the market did not support their valuation. Besides, that’s just one appraisal. You’ll get 10 different appraisals from 10 different people. The real value of the house is what you the buyer are willing to pay.


  • Start nit-picking like crazy
    If the house has central A/C, check the air filter and if it’s dirty, it’s a good sign of other potentially undesirable issues you might find in the house. What else did the seller neglect? Think about it, they are selling their house, and did not even spend the $2.00 to change the filter to make a good appearance. Is the yard in good shape, or is it overgrown with weeds? The truth about the rest of the house will be revealed when you have a home inspection company thoroughly inspect the house and give you a list of their findings. Don’t expect the real estate agent to disclose to you everything that is wrong with the house. There could be latent issues they are unaware of or the seller could be lying. The listing agent is often at the mercy of the seller for accurate information.


  • You are not going to pay for the seller’s mistakes
    Tell the seller they paid too much for the house to begin with in an up market. Paint a picture of the market being way down and tell them you refuse to pay for their mistake. Tell them the house simply is not worth what they paid.


  • Go it alone, no agent, and see if the listing agent will take 3%
    If you are not using a buyer’s agent yet, contact the seller’s agent directly and ask if they will do the deal for the same 3% commission that they would have made if you used a buyer’s agent. (Remember, they split the 6% commission with the buyer’s agent). This saves the seller 3% of the house and may even get you a lower selling price as well. It’s a win-win deal for everyone.


The very worst that can happen is the seller will say “no”

Many buyers might be happy if they can chisel a couple of grand off the selling price. But you need to think in much bigger terms. Instead of offering a couple of thousand below the price, you should offer many thousands below. The worst that will happen is the seller says no. They may also get really indignant and refuse to deal with you any further. We know someone who bought a very nice 2nd floor condominium with vaulted ceilings in 1982 for $69,000. They sold it 17 years later in 1999 for $63,000. Other condos in the same development within the previous 12 months had sold between $57,000 and $71,000. You can see not everything appreciates.

Anything is negotiable in life, you’ve heard it a million times before. We know a buyer who bought a nice house with a 7 ½ foot grand piano in Ft. Lauderdale from a seller who had second mortgaged himself down to 0 equity in the home. The buyer got a great deal on the house, and negotiated the 7 ½ foot grand piano into the deal. Anything is negotiable from furniture, to appliances, even the toilet paper! Be sure you get the seller to include any items you negotiated during the sale into the contract.

Where to find a bargain

Often when someone’s grandparents or parents finally die, they inherit some sort of property, usually a house or a condominium. The heirs will then immediately list the home for sale and attempt to get market value. But often they settle for much less because they just don’t want to mess with it, as they are still dealing with other aspects of the estate and want quick money. Sometimes this can be a great way to pick up a piece of property real cheap. Other bargain distress sales for you might be a buyer who is about to be foreclosed, a couple with marital problems, a corporate relocation seller, or someone who is upside down on their mortgage.

Even when presented with all the data from the sellers proving what their house is worth, there is still no reason why you cannot submit a low offer. Just keep repeating to yourself, that the house is only worth what you are willing to pay for it, not a penny more. Don’t get suckered into the seller’s Jedi mind trick of making you think everyone wants the house. If that were the case, everyone would have bought the house already. Before you agree to their offer, take a look around the house. Stand in the front yard and just gaze around at the neighborhood. Do you really want this house? Do you really want to pay this price? Are you going to lie awake at night lamenting the fact that you paid too much for this house in a hot market, and now it’s worth much less? Time for some serious soul searching. Welcome to the big leagues.

Making Your Offer To The Sellers

When you make the offer, back it up with a $1000 check and be sure to enclose a copy of an up to date valid mortgage credit approval letter from your lender, so the seller knows you are serious about buying and are approved for financing. Listing agents are always suspicious of offers. On the deposit check write a memo that they are not to start escrow with it unless the seller accepts your explicit offer price and terms as listed in the contract. Be sure you have a good property attorney give you an iron clad contract that protects you should you have to cancel the sale. Valid reasons for getting out of the contract are financing falling through, termites, bad title, undisclosed liens, bad inspection, the sellers are in divorce, the property is tied up in probate, you cannot sell your existing house in time, etc. Make sure the sellers know you’ll give them a quick close. Make sure you have enough contingencies in your contract to protect you, but not too many that might spook the sellers.

Stay The Course! A Deal’s A Deal

I’m a firm believer that when you give a deposit and sign a contract, there is no reason to cancel the deal, except for standard contingencies, or misrepresentation from the sellers. So don’t do anything stupid like keep on shopping for another house and then try to get out of your deal. Don’t email us to ask if it’s legal for them to keep your money, we are not lawyers, and laws vary county to county, state to state. You should be asking your property attorney, not us, and if you don’t have one, you better get one. Don’t even email us asking what to do because we just delete emails like that.

Closing the deal

As I mentioned before, make sure you have a good property attorney work with you to provide a contract for your deposit and escrow. I cannot stress enough the importance of being real explicit in your weasel clauses. You need to make sure that this entire sale is contingent upon you being approved for financing, upon the seller accepting your offering price as written explicitly in the contract, a death of a spouse, and you need to consider other possibilities too. If the survey does not match any Real Estate Agent “claims”, it should be grounds for voiding the contract. Supposing you are being transferred to a new city and you left a deposit on a new house, then your transfer falls through. You better have that scenario in there also. In fact you can add any scenario you want to the contract as long as the seller agrees to it.

Warning tips for house buying

If you weasel out of a contract and it’s not due to a contingency listed in the contract, you WILL LOSE YOUR DEPOSIT. Put down the smallest deposit possible, a safe amount of cash that you are willing to lose.

Losing the deposit is the least of your worries. The seller can sue you for breach of contract, then I’ll sue you for being a moron. The courts can force you back into the deal. Think about it for a minute. The seller spent weeks and a lot of money listing their house and you are about to thrust them right back into it again. Most likely you’ll end up paying a settlement.

Standard Contingencies: Rebels with a clause
First off, let me state that this section is not to be considered as legal description, and furthermore, some of these items might not be allowed in your area, which is why you need to use a good property attorney. Do not try to cut corners and take information from this paragraph to make your own contract. This information is just to illustrate common contingencies that home buyers choose to include. You may need others not even mentioned here. Keep in mind the more contingencies you include make it likely the seller will reject your offer, but most of them are standard.

There are certain weasel clauses that buyers usually insist on in their offer to the seller. Essentially these clauses say “here is my deposit, but if this or this or this happens, the deal is off and I get my deposit back, no harm no foul.” You really should be using a good property attorney to create your contract for sale and purchase of a house. Standard contingencies might include your ability to get financed by the bank with the fees and interest rate you declare in the contract. This can allow you a way out if the bank suddenly decides to bump up your APR 2% or tack on some fees that you did not expect. Another contingency is a land survey.

Many buyers like to also add a time limit or list a date that closing will take place. Many people don’t realize how powerful an ally this clause can be. If the seller wastes too much time, the buyer can lose heir mortgage rate lock-in, call off the deal and get their deposit back from the escrow company. If anything else goes wrong with the deal, like the sellers turn sour on you, or pull any other scam and do not give your deposit back, the time limit clause will expire and ride in like a rook at the end of a chess match to help you declare checkmate!

A good clean title is usually another contingency, showing the house is free of liens, along with engineering inspections and termite inspections. Another good one to consider that few people stop to think about is restrictions, easements, and limitations or zoning changes that appear on the plat, which were not disclosed to you by the sellers. For example, the sellers agent says the whole neighborhood is zoned residential, but a check of the courthouse records shows the wall in the back yard of your purchase will soon separate your house from a strip mall. You’ll want to get out of that deal real quick.

Your power company can have an easement going right through the middle of your house because the people who built it did not check the records or do a proper survey. FPL can start drilling right through your living room floor to lay their new transmission line, and they’ll have every legal right to do it too. It’s not their fault your house was built there incorrectly. Can you just move that couch over a few feet? We need to drill right there. Thanks a bunch.

House buying tips for money saving tips

If the survey is only a year old, you may be able to save some money by calling the survey company and getting an updated certified copy. Just make sure your lender allows it, and that there are no other local laws or requirements that would disallow it. Make sure nothing changed since the survey was issued. This can be much cheaper than paying a survey company to come back out and charge you $500.

For condominiums and homeowner associations, there should be clauses for non-disclosed assessments. In other words, if the seller says there is no planned assessments, then you find out there is a $5,000 new roof assessment for each unit owner, that could be illegal, and you can use that clause to get out of the contract.

Here’s another good contingency: any and all renters, occupants, or tenants should be out of the house before you close or the deal is off. This can really benefit the buyer should squatting tenants decide not to vacate. Everyone is under the impression they can just call the cops and out go the losers. This is a huge misconception. The laws that over protect tenants are not only unfair, but pretty stiff as well, and it can take months to legally get them out of your house once they have established a dwelling there. Believe me, you don’t want to hang around for this mess to unfold. There might even be clauses allowing the buyer to recover attorney fees from the seller in case the seller defaults on the contract.

Failure To Perform.

No, this is not a Viagra commercial. Now for the bad news. Sure these clauses I mentioned here can protect you, but the seller has a few that they will want to add to protect them. Now the fun starts. Have your people call my people. A common one here is the “Failure To Perform” clause. Read that clause carefully and memorize it. It basically says that if you try to weasel out of this purchase for any reason other than a legitimate clause written into your contract, the seller can keep all the deposit money you put into escrow. All Of it. Let me repeat that in case you were speed reading. All of it. So the less you put down, the less you stand to lose should you default. If you default, don’t email me asking what do, I don’t want to hear from you and I just delete those types of emails. That’s what your lawyer is for.

As long as it’s legal in your area, you can have all sorts of clauses, like the seller pays some of your closing costs, or buys you a warranty, or leaves all the appliances behind, your property attorney can help you decide which ones to include. Just remember, the harder you make it for the seller to sell the house, the harder it will be for you to buy it. In The Art of War by ancient Chinese warrior Sun Tzu, he warns you not to force your enemy with their back up to a wall. Always give them a way to leave peacefully, or with nothing to lose, they will fight to the death and probably win.

Share this Story
Load More Related Articles
Load More By Nasim David Bennett
  • Home Uncategorized

    How To Buy A Used House

    You’ll find everything you need to know to come out ahead when buying a used home, including negotiating tips, scams and ...
  • Home

    How to Sell Your Home

    You’ll find home selling tips for houses, townhomes, villas, and condominiums, scams to avoid, how to choose a seller’s real estate ...
  • homeowners insurance cost

    How Much Homeowners Insurance Do I Need

    The time to think about whether you have home insurance are not enough when your home burns. Because most mortgage lenders ...
Load More In Home

Leave a Reply

Your email address will not be published. Required fields are marked *

Check Also

All About 2nd Mortgages, Refinancing, and Home Equity Loans

This useful guide to home mortgage refinancing and ...