We hope everyone had a wonderful Thanksgiving holiday surrounded by family and friends!
I know our team surely enjoys this holiday as it is one of the few times real estate agents can stop looking at their phone for a day (or even sometimes, a full four days).
In honor of Black Friday, the past few years, I have written about homes or income properties that could be had at potentially amazing deals. There are also tips in those past posts on how to find deals yourself. Take a look at the past two years…
November 2019 Blog: “Score a South Bay Real Estate ‘Black Friday’ Deal”
November 2020 Blog: “Score a South Bay Income Property ‘Black Friday’ Deal”
Back in 2019, there were actually some deals to be had. In fact, the South Bay as a whole saw prices slightly decline that year.
In 2020, the Coronavirus had turned the housing market upside down, however, thanks to renter protections against evictions, income properties flashed opportunity at some nice discounts.
Now we are in 2021. It is one of the strongest seller’s markets in a generation.
There are not too many deals out there. And it is safe to say, it is a very tough time to be a buyer!
For this week, I am going to try to help buyers with ways to cut costs on their real estate transactions.
“Black Friday” Cost-Cutting
If you are a buyer, there are plenty of ways you can get creative to save yourself some costs in this wild market.
Pre-Negotiate a Credit in Your Offer
This is old school back to the Great Recession. There was a time where Buyers would write in their offers that Sellers were to cover there NRCCs (non-recurring closing costs). It was standard in a buyer’s market and a big cost savings.
Back then, those NRCCs were a big deal when it was tough to get a loan and the economy was in dire straits.
Just because things are different today does not mean you cannot ask for a $5,000 credit in your offer. Most sellers will discount your offer by the amount of your credit to make it apples to apples against other offers, but sometimes, if it is a solo negotiation, Sellers get fixated on the price and forget about your credit.
Even if sellers do not forget about your credit, generally, I believe a receiving a credit of $5,000 is worth paying $5,000 more in price.
For example, a $1 million home with 20% down requires you to bring $200,000 to the table.
That same home at $1,005,000 with a $5,000 credit requires you to bring $196,000 to the table. That credit on the closing statement is powerful!
You keep $4,000 in your pocket and amortize that extra $5,000 in price over the life of the loan at 3% or lower. That’s a no-brainer.
Credit Your Home Warranty Before Close
It is customary for a seller to pay a home warranty on just about every listing here in the South Bay. Typically, home warranty payments are between $500 to $1,000.
I have heard from one too many clients that they never use the warranty, forget about the warranty, or if they call, it ends up being way too much of a headache to get a payment from the warranty companies.
Why do what is customary for something, when nine out of 10 buyers rarely use it?
When you are about to remove all contingencies, ask the seller, instead, to credit you that money at closing rather than giving you a policy you do not need. It is an extra $500 to $1,000 in your pocket.
Ask Escrow for a Discount Upfront
A little-known fact is that escrow fees are negotiable, however, it is very poor form to ask for any discounts unless it is done well before closing.
If you ask for a discount, especially upfront, escrow officers will almost always give you a discount in good faith to keep everyone happy.
A $1 million escrow fee might cost you around $2,500, while a $3 million escrow might cost you around $6,500. Politely asking for any sort of discount could mean $250 to $650 easily.
Include Termite Repairs in Your Offer
Back in the day, termite reports and repairs were a default item in the C.A.R. purchase contracts. A few years ago, termite reports/repairs were eliminated.
Be sure to ask that sellers prepare a termite report and are responsible for Section 1 repairs. I typically see termite repairs between $1,000 and $5,000, roughly. Sometimes it can be much higher.
This term can be a long shot as many sellers/agents are getting wise that they can counter out those terms, but if you can sneak one in, you can get free termite repairs or even take the repair dollars and credit yourself the money (just like a warranty).
There you have it. Great ways to land discounts as a buyer in a tough market.
If you were to purchase a $1 million home using the above strategies, you could potentially find yourself around $8,000 in savings.
Every penny counts!
Wishing you all the best over the rest of the holiday weekend.