My son and daughter-in-law are in the process of buying their first home (they want that $8000 tax credit!) and they’re asking some really great first time homebuyer questions. I thought I’d repeat some of our conversation here:
No seller really expects a full price offer, not in this economy anyway. The past national average was that offers came in 3%-5% below asking price. Now experts say the average national discount is about 10%. Sellers are not surprised when you offer less than they’re asking.
6% real estate commission is the norm in most states. If you buy from a for-sale-by-owner, you can use this to reduce your asking price since, if you buy their home, they won’t be paying that commission. The seller knows this will be a cost if they list the property and they expect to pay some commission if a Realtor brings them a buyer.
Closing costs. Both buyers and sellers pay some and can negotiate who pays what. In North Carolina, typically what the buyer pays includes:
- All fees to do with obtaining the loan
- Mortgage insurance if borrowing more than 80% of the value of the property
- Appraisal
- One year’s homeowner insurance premium
- Property taxes from the day of the purchase to December 31
- Attorney fees
- Title insurance
- Fee for recording the documents
- Survey
- Home inspection
- Pest inspection
Your lender will require a survey and an appraisal. They have to know the value of the property they’re loaning against. Costs are typically paid by the buyer but negotiable.
Transfer tax – yes, many states charge a tax to transfer property to a new owner. For example, $1 per $1000 of selling price. Check with your county.
Every lender requires an inspection before they will loan on a property. EVERY inspector finds things that need repairs. It is not uncommon to get a list 5-10 pages long… so don’t be surprised. One time, I had an inspector say that the attic pull-down staircase legs were cut on the bottom at the wrong angle… What??? Inspectors find lots of things and sometimes crazy things. And, you may want all that stuff fixed. If the inspector points out a flaw, buyers typically say, “fix it before I buy it!” Most sellers are surprised at the cost involved in fixing things the inspector finds. We all live with quirks in our own home, but a new buyer doesn’t want them. And, its amazing what we don’t know about that’s going on in our home. An inspector crawling under the house and in the attic finds all kinds of interesting things.
You’ll want the seller to provide a good Home Shield Warranty. Cost is typically $350-$500 and the policy will cover things like appliances and heating and air systems so that, if they break down in the first year of homeownership, some repairs are covered by the warranty.
Appliance allowance. You said that the appliances are dated. Rather than replacing them, many times sellers simply give an allowance (I would think $1000 is reasonable) for replacement so the buyer can get the ones they want.
Termite (Pest) inspections are absolutely required in North Carolina because, with our humid climate, we have lots of crawly things that eat and destroy homes (termites, powder post beetles, flying ants, etc.). I don’t know if its required in your frozen tundra!
By fall, sellers get a bit nervous about having their homes remain on the market. Winter is usually slow for selling as people are busy with school, holidays and they just don’t want to move when it’s cold! By October, sellers may be more willing to negotiate even further.
Anyone have anything to add?
