Once upon a time, there was a great tradition in real estate where sellers listed their homes, buyers made an offer and eventually, both parties met in the middle and, like magic, you had a sound transaction. We haven’t seen much of that tradition recently, but don’t give up, you may start to see more of it.
Sellers, if you can find one, are more receptive to certain requests than they had been previously. Despite hearing that homeowners don’t want to give up their ultra-low mortgages, there is always someone who needs to sell their home. Since the pool of buyers has dwindled recently because of higher interest rates and lack of inventory, motivated buyers need to find sellers out there who are also motivated and more flexible than they were two to three years ago.
The obvious buyer strategy is to ask for money or something that costs money. With mortgage interest rates getting close to 8%, every penny in the hands of a buyer is a valuable one. Offering or asking for help with closing costs isn’t a new concept. Buyers who may be short on cash but qualify for financing may ask sellers to provide a credit at closing to be used for closing costs unrelated to their mortgage rate. This amount can usually be rolled into the financing for qualified buyers and the seller could easily be netting the same.
Sellers know or certainly should know what the flaws in their homes are. They may not want to take on a renovation project but are faced with buyers who may again be short on cash for repairs or adverse to doing renovations. Sellers can agree to make specific improvements to the home before closing. This agreement can be negotiated between buyer and seller so that both feel they come out pretty much with what they want and can close the property.
The next concept is a little more complicated but again includes money passing from the seller to the buyer. Sellers can agree to lower a buyer’s mortgage interest rate, known as a rate buy-down, by offering to pay closing costs in the form of points. If a buyer can reduce points, their mortgage rate can be lowered, resulting in a lower monthly payment. Points are typically 1% of the loan amount, so if a seller gives two points to the buyer on a $300,000 loan, that’s $6,000 the buyer doesn’t have to come up with.
Finally, sellers need to consider capital gains in a conversation with their tax attorney or preparer. A seller who is in a position where they may have large capital gains on the sale of their property needs to know exactly what those gains could be in real money. Entering a negotiation with this knowledge is important since the seller and the buyer may not be that far apart on their offers and counter offers if you calculate what it may cost the seller in additional capital gains. Knowing ahead of time how much flexibility you have between the sale price and capital gains could save the transaction and still net the seller almost what he wants. Holding out for an exact number embedded in your brain could kill the deal and keep you from moving on.
Go out there and make magic. Beat the bushes to bring those sellers out from the scrub. An old high school friend of mine’s mother would say, “There’s a lid for every pot.” And even though she was talking about boyfriends, the principle is the same. Go find your pot.
