When buying a new home, there is more to consider than just price. Here are a few points from Cornerstone’s March Real Estate update.
Fixating on price in real estate may cost you the deal:
# Sellers who decide that a specific dollar figure will buy their home and won't budge from that bottom line may sell themselves short.
# Buyers who drop out of a transaction for a property they love because the seller's counter-offer shocks them may be quitting before they have really started negotiating.
When a buyer makes an offer to purchase a house, condominium unit or commercial property, the purchase price is a prime consideration, but it represents only part of the total value offered to the seller. Problems may arise for both sides of the transaction when this fact is forgotten.
Value Elements in an Offer
The value expressed in a buyer's offer to purchase, or in a seller's offer to sell, involves 5 key elements — a financial package:
# Purchase Price, the stated amount of dollars offered by the buyer, represents a significant contributor to value, but there are other important factors which can reduce the amount the seller receives or which can compromise the transaction. It's not the purchase price, but the net proceeds of the sale that sellers — and savvy buyers — should concentrate on.
# Closing Date, or the day ownership changes hands and the seller receives the money, can represent cost or value to both parties. Savvy buyers usually attempt to meet the seller's preferred moving date, especially when the seller has committed to purchasing another property or needs the proceeds of the sale on a specific date. For instance, a closing before that date may be expensive because the seller would have to move out and store everything until they could move into their new home. That double move and the inconvenience represent out-of-pocket costs and time lost that make the actual purchase price lower than stated. A closing date later than the seller's preferred date may leave the seller owning two homes – and paying off two mortgages – at once. The seller may incur extra costs in arranging bridge financing to meet legal obligations to close on their new home before they receive proceeds from the sale of their current home. Choice of closing date may represent costs or value to the buyer as well. Balancing this reality for both parties is key in negotiation.
# Inclusions and Exclusions to the sale also represent costs and value for both parties. Appliances, heating systems and draperies are common seller inclusions designed to boost value for buyers. If warranties for everything from a new roof or solar panels to new appliances cannot be transferred to a buyer, these items become “second-hand”and will probably represent less value to buyers. Buyers are also free to include excluded seller items, like an antique light fixture, in the offer to purchase. Deals have been lost to disagreements over light fixtures, fireplace accessories and vintage furnishings, so prudent sellers remove contentious items before listing. A buyer may offer less than list price and ask for nothing; a seller could sign back for more money and include items to sweeten the pot. Value is very subjective for these non-real-estate items and that's where negotiations can get heated.