Real Estate News
5 Tips for Real Estate Negotiation
Negotiation of any kind is a skill in and of itself, and like anything, some people have a natural affinity towards it and others would rather run the other direction and never look back. For those who love the art of negotiation, just the mere thought of it can practically turn them into a haggling expert. Whereas for the rest of the population just the thought of it fills us with dread, the fact that our own money is at stake makes it even more difficult despite the fact that we could save ourselves a bundle! As if the act of negotiation wasn’t difficult enough for some, add the market dynamics into the equation and you’re left with a complex aspect of real estate that most people would rather forget altogether.
If you fall into the latter category of the haggle-haters, don’t despair! We’ve got a list of 5 tips for real estate negotiation to help take the pressure out of haggling and will ultimately help you protect your interests, your cash, and your sanity.
1. Build a solid arsenal of reliable information.
It is absolutely essential to be prepared for any negotiation and to arm yourself with a large resource of information to ensure a better result. Aggressive negotiation is never about guessing the “right move”, and is always about knowing the right move for the situation, as you should be the expert. Make sure you are very acquainted with the real estate market in your area, which includes:
- Knowing what similar homes have recently sold for
- The average margin higher or lower than the asking price
- The average length properties are on the market in your area
You can also use your agent to help you ascertain more information about what is important to the other party. By reaching out to the other agent involved you may discover that moving quickly is more important than securing the best price. Not all agents will divulge this information, and they’re certainly not obliged to, but most will do so often in the interest of securing a favourable deal.
Likewise you should consider giving your agent the go ahead to disclose what is important to you, if the opportunity arises. Be clear about what your own priorities are, including your top and bottom line and be very careful when tempted to waiver from your own priorities as this will leave you feeling dissatisfied with the negotiation. Be firm about what is really important to you.
2. Reframe the negotiation as a problem-solving challenge.
Gone are the days when negotiating was a two-way power struggle between the buyer and the seller. Now there are often several other factors to consider including the buyer, seller, and often the banks (on both sides). More often than not, the banks will dip their toe into the negotiations by way of adding their own guidelines that impact the terms of the deal. There are any number of possibilities that could arise when the banks get involved, so to save your sanity it is better to approach any negotiation as a way to solve a problem – that problem being the various needs of the many parties involved. The solution? Meet as many needs as possible without sacrificing your bottom line.
3. Control your thoughts, manage your mind.
There is little point in purchasing a home that you don’t really like or strongly love, BUT you must remember that when it comes to negotiation that the party who is least attached to a particular outcome generally has more bargaining power, simply because they have less to lose emotionally.
If you find yourself in a multiple-offer situation or a sale in which you might only have one chance to make an offer, it often makes more sense to set your sights on a reasonable offer price based on how much you want the home, or subsequently how much you don’t want to lose it. When you are emotionally attached to a home it can often be very difficult to think subjectively on this matter. The more you have your heart set on something and you see the negotiation going south, the more likely you are to panic and either throw money at it in order to sway the negotiation in your favor, or cave in on other points that are really important to you.
Save your sanity by speaking to your agent about what is actually in your power to negotiate in the first place, and leave the rest aside. There is no point in emotionally exhausting yourself trying to negotiate things that are not (and will never be) on the table, such as the bank’s bottom line, repairs on short sales, etc. Find out what is negotiable from the start and negotiate only those points, and try to remain as neutral as possible. Remember knowledge and control is power when it comes to the back and forth of real estate negotiation.
4. Reducing time pressures reduces stress.
When you are pressured by a deadline, you may feel more inclined to take the “easy road” or make a decision based on emotion, especially when it comes to something as primal as shelter. Don’t be tempted to make or accept a questionable offer simply because you are faced with the prospect of having to move before a deadline. If a deadline date is looming and you feel you may be attracted to needless compromises for convenience, it is better to take a beat and re-assess. Would moving to a short-term rental property or setting up a Plan B living situation really be that inconvenient? It could save you hundreds if not thousands of dollars on your sale and you’ll be left with the peace of mind that you stood firm on the points that were important to you.
5. There is a difference between acting quickly and acting impulsively.
Time is always an issue when it comes to real estate, and generally the faster you are able to move the better. However, that said there is a big difference between acting quickly and acting impulsively. When time is of the essence you should have a clear plan in place to move quick enough to get results but not so quickly that you revert to acting impulsively based on your emotions.
When find the house you want make an offer, and likewise when you get an offer or a counteroffer, respond to them. But remember if there is no clear and quick response, you can take the time you need to make the right decision. Be calculated about when to move quickly and when to take the extra time as you never know when another party might show up to change the bargaining dynamic. This comes back to being prepared for the negotiation…when you are prepared you are positioned to act quickly and strategically rather than impulsively.
Gain Real Estate Tax Breaks With These 9 Documents!
April 15th, tax day…is fast approaching! But if you’re hoping to cash in on real estate related tax breaks then don’t delay, get your taxes filed as soon as possible to ensure you don’t miss out!
We’ve put together a list of important documents to consider as you file your taxes. We suggest you go over this list with a fine-toothed comb, so as not to miss a penny that could be coming your way. There are plenty of tax rewards that come along with owning a home, make sure you reap all of your benefits!
1. Mortgage Interest Statement –IRS Form 1098
This is the biggest potential tax deduction around and allows for a deduction of 100 per cent of the mortgage interest you paid in the past year. That also includes prepaid interest, or points you may have paid at the close of escrow for any properties you purchased in the past year. This particular form should be mailed to you by your mortgage lender, and will report how much interest accumulated for the previous year (if you haven’t received your form yet, it may be available to you via your mortgage lenders online services). If you are claiming for this deduction, you must include the IRS Form 1098 when you file.
2. Property Tax Statements
As a homeowner, you are also entitled to deduct the property taxes you pay to the local city, county, and (or) state. However, do be careful as many of the miscellaneous expenses that are bundled onto the property tax statement are not deductible, this includes services such as waste management, street lighting, libraries, sidewalk construction, etc. Be sure to have your property tax statement to hand as you file to ensure you are not claiming for anything that is not included / allowed. If you purchased your property in the last year, you may have not yet received your property tax statement, if not use the HUD-1 statement below for the interim.
3. Uniform Settlement Statement (HUD-1)
If you sold or purchased a property in the previous year, shortly after the close of your sale you will have received the HUD-1 Settlement Statement. This legal-sized document accounts for all of the credits and debits for you and the buyer (or seller). This document may have also been given to you on a disc; if you cannot find it or no longer have it your agent should have a copy. This paperwork should outline that can be useful when filing, including any prepaid interest, pro-rated property taxes (useful if you have not received your property tax statement above), and closing costs. Some states also offer tax breaks for purchasing foreclosure properties, so it is worth checking with a tax professional or an accountant in the know as to whether any of these rewards apply to you.
4. Moving Expense Receipts
If you bought or sold a property in the previous year, your moving expenses may be tax deductible, however there are some stipulations to this rule. The expenses that could qualify are packing and shipping, and costs of travel and lodging (meals not included). Your move must meet the IRS time and distance tests to qualify, in brief you must be working (essentially) full-time and your new home must be at least 50 miles away from your old home, including the distance between your old home and your old job. If you qualify for this deduction, you will need to include all of the receipts for moving in your paperwork.
5. Cancellation of Debt Statement – IRS Form 1099
This is an important one, especially with the current economy and the rise in short sales and foreclosures. If you are a homeowner who lost a home due to foreclosure or you negotiated a short sale in lieu of foreclosure, you may have received a Form 1099 from the lenders. This form states the income in the amount of the mortgage debt that was cancelled during the foreclosure / short sale. This form is important as any money borrowed and then subsequently cancelled the amount borrowed becomes income (and all income is taxable). It is imperative to ensure you have this paperwork in order before you file.
6. Utility Statements for Home Office
Unfortunately for the majority of people who are employed and work at their employer’s place of business, this deduction will not apply. However, if there is any part of your home that is “regularly and exclusively” used for business purposes that part of your property may be considered a home office, and you can deduct a portion of your utilities as a result. These utilities generally include phone bills, Internet bills, heating, cooling, and items purchased for the office. Check with your tax pro on what is allowed before claiming this deduction, as there is sometimes a fine line between what is allowed and what is not allowed.
7. Income and Expense Statements from Rental Properties
If you are a property manager or someone who owns a property and rents it out, you are likely to have a more complicated tax situation. Complicated isn’t always a bad thing, it simply means you are likely to have more income streams and expenses than the average taxpayer. You must declare all income and expenses when filing, and return all receipts with your paperwork. In this case it may also be prudent to consult a tax pro to ensure you are covered by way of deductions and to ensure you are appropriately depreciating the property.
8. Contractor Receipts from Energy Efficient Home Improvements
Have you made energy efficient improvements to your home in the last year? Under the Non-business Energy Tax Credit you may be eligible to claim tax deductions based on the type of improvements, and the tax breaks are pretty good! You could be eligible for a credit of 10 per cent of the cost of the upgrades, up to $500 (check the offset amount allowed for each type of upgrade). These generally include energy efficient insulation, double-paned windows and new furnaces.
9. Mortgage Credit Certificate (MCC)
A Mortgage Credit Certificate is issued by your local housing authority and may entitle you to a pretty big tax break! This certificate is based on a percentage of the mortgage interest that has been paid (on top of your mortgage interest deduction). These credits only apply if you actually live in the home and have an outstanding mortgage on the home. They also only apply to taxes that you actually owe, and are not applicable if you are owed a refund.
Although this list may seem like a lot to take in, it would behoove you to take a good long look at your tax situation and claim as many deductions as possible. As they say… “every penny counts!” If you think you may qualify for any of the above, but feel a bit overwhelmed it can’t hurt to consult a tax professional to ensure you’re maximizing your deductions while minimizing your risk of audit. April 15th doesn’t always have to be a “dark day”, with these homeowner tax breaks, you could be in for a good start to the new tax year.
Tips to Avoid Complicated Closings
Everyone knows that the sale of a house is no small thing; it takes not only a lot of time and energy but hard work on the part of both the buyer and the seller. No one wants to go through the entire pre-sale process only to have things fall apart at the last minute. So how can you ensure that everything will go smoothly when you come to the closing stage of a sale? We have a few tips to ensure your sale is hassle-free and happy!
Analyze Your Offers – Make a Contingencies Plan
You may be surprised to learn that when it comes to closing on the sale of your house the highest price may not always be the best price. If you are lucky, you will have several offers on the table and it can be very helpful to set out the guidelines for which you plan to evaluate each offer before they start coming in.
The points you should consider when analyzing offers:
- Inspection contingencies, and why you want the fewest number possible as a seller
- Mortgage contingencies and the impact the length of the contingency will have on your sale
- Size of the down payment
- Strength of the deposit
- What the mortgage terms mean for your sale
As a seller, making use of this analysis can prove an invaluable process to ensure your sale closes quickly and efficiently. It may seem counterintuitive to look at the terms of the sale in this way given the fact that this is the opposite strategy you would employ when purchasing a house. The idea here is to ensure that the offers made on your property not only fetch the best price but also retain the shortest contingencies, and maximum flexibility in the buyer’s mortgage terms. All of your efforts in analyzing these offers are in an effort to lock buyers into a deal as soon as possible thus minimizing complications for your sale.
Secure Back-Up Offers
You probably know that a hefty percentage of real estate deals fall through even before the closing stages so it is especially prudent when closing on a sale to have a back up to “fall back” on.
When analyzing your offers (as above) be sure to not only consider the best offer, but also the second-best offer as a back-up.
Assign Property Delivery Requirements
How you deliver a property is important to buyers, but also to the real estate professionals you work with on the sale. As a seller, it is your responsibility to fulfil any delivery details that are set out in your contract, but also to leave the property in a good condition. This means:
- Cleaning the property thoroughly after moving out
- Touching up any damage caused in moving out of the property
- Removing any garbage from the inside and outside of the property
- Ensuring that the yard and outside areas are trimmed, swept and tidy
Although it may be easier to just leave the keys and wave goodbye to the property you just sold, the delivery of the property is your final responsibility as a seller – you should leave the property as you would want to find it yourself.
Catching buyers can be difficult, and getting to the closing stage of a sale might seem a long way off, but it doesn’t have to be a challenge. Follow our simple tips for avoiding complicated closings and reap the benefits of a smooth sale!
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