In a follow up to yesterdays post â€œEstimating the Closing Costsâ€ the next step in every buyers strategy is how do you negotiate on covering the anticipated closing costs with a home purchase in Washington DC.
For sellers it is all about the â€œnetâ€ and what they will be walking away with or bringing to the table.Â In general a seller has about 5% brokerage costs for marketing, 1.45% in DC tax and about another .5% in other legal fees so the sum total for the seller is about 7%.
As the buyer you have your down payment and another 3% in closing expenses for the taxes / escrows / legal fees etc.Â As for negotiating on what is referred to as a seller credit can be a tricky balance between that and the sales price.
I generally ask that we come up with a strategy with clients prior to submitting although I am coaching with every property we go into explaining which properties you can negotiate on either just the price or the seller credit or both, it entirely depends on knowing a few variables about the sellers position.
If pricing is your strategy then you will want to go all in with your earnest money deposit ( EMD ) showing a high interest but looking to negotiate.Â Whatâ€™s a high EMD?Â I generally say upwards of $15,000 shows you are much more serious than anyone else shopping on the market and lets the seller know you are the one to hammer out a deal with.
If a seller credit is what you are looking to do, you need to be able to demonstrate your actual ability to finish the deal as most sellers feel a credit is used by purchasers that tend to be border line in their ability to purchase as they might have a high income but poor savings rate.
Either or you need to really show your ability to cross the finish line with the sale as every sellers fear is to be hung up under contract and have to release the purchaser because the financing did not work out for them.
As for the actual strategy I find simply negotiating on the actual price, just one aspect of the sale rather than both the credit and price because it tends to be cleaner and then going back once an actual net value has been leveraged and backing a credit out of the sales price, so that the sales value is adjusted higher to accommodate an actual credit.
It is a delicate matter when you are dealing with money in the $100kâ€™s so being responsive and understanding that this is a negotiated matter, not a winner takes all scenario will lead to a successful settlement.
Green DC Realty Team
Phoenix Real Estate Solutions