Home buyers can reduce their expenses by negotiating on more than just the price!
Home buyers might have better luck saving thousands of dollars by focusing their haggling skills on items other than the home’s purchase price.
The price of the home is a major detail, especially as mortgage rates move up. But given that the housing market remains competitive in several parts of the country, home buyers hoping to negotiate down a seller’s asking price might risk losing their bid.
Costs to Negotiate
Financial advisers and brokers say that in certain markets, buyers should focus more effort on negotiating other costs. There is thousands of dollars in savings to be found bargaining with moving companies, mortgage lenders and utility companies even as inflation remains elevated.
Mortgage Rate
Big potential savings often come from comparison shopping and negotiating your mortgage rate. Overall, about 72% of prospective buyers haven’t shopped around, nor have plans to, for a mortgage that best suits their financial situation.
Borrowers who applied with two different lenders reduced their mortgage rate by an average of 0.10 percentage point, according to research from Freddie Mac. During the first 11 months of 2022, when the average mortgage rate increased at its fastest pace in 40 years and surpassed 7%, the average reduction in rate doubled to 0.20 percentage point.
Take a $400,000 home price where the buyer puts 20% down and is looking at current mortgage rates ranging from 6% to 7%. Over 30 years, the difference between 6% and 7% could add up to roughly $75,000 savings in interest.
Right now, some banks are willing to give you better terms. In exchange, however, they might ask or you might offer to pay the bank fees. As a buyer, the key is to know everything that comes with your mortgage rate.
Ask To Skip Fees
With mortgage volume down sharply from a year ago, many lenders want to be competitive to win business and so they might be willing to waive certain fees. Common fees you can negotiate with your lender include origination fees, underwriting and loan-application fees. Most lenders will give you an estimate of fees before submitting an application.
Your lender might consider waiving at least some of their fees, which would be a win considering lender fees can amount to about 1% to 2% of the total loan amount.
Reduce Your Moving Costs
A rise in mortgage rates in the past year has limited home sales and put a dent on Americans’ moving plans. This might make some moving companies more willing to negotiate than they were during the pandemic-fueled housing frenzy. The average cost of a local move is $1,250. For long distance, it will cost a bit under $5,000 (based on 1,000 miles for a two to three bedroom home).
Get quotes from at least three moving companies. These quotes should be given to you in writing after an inspection of your home and belongings. Movers will typically charge a flat fee or an hourly rate. If it is an hourly rate, be sure to ask for the estimated number of hours and request that the moving contract include a cap so you know the possible maximum bill.
Negotiate not only on price, but also on fringe benefits, such as packing and unpacking your items, furniture assembly or replacement value insurance coverage if any of your belongings are damaged or lost during transit. Ask if you can have a reduced price if you are willing to move on a weekday.
Find Creative Ways to Cut Your Upkeep Costs
Once you move in, the costs to maintain your home add up quickly. Look for ways to trim those expenses. You could band together with your neighbors to obtain a group rate on services such as driveway paving and home painting.
Bottom Line
You don’t get a discount if you don’t ask!!!
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