negotiations

Cut the broker's fee in half.

NYCMatt,

Thanks.

Anyone care to add?

Go through the costs on the mortgage, question them all, especially when they are out of line with the market. They like to over-charge for basic $10 credit checks.

This is impossible to answer because we don't know anything about the deal as a whole. We don't even know which side of the deal you are on, and yes, amazing but true, there are sellers out there who demand that buyers cover all or most of the seller's closing costs. (Listings like that are called expired-unsold.)

But I'll tell you what: In any negotiation, the person who can, and will, walk controls the deal.

How badly to you want this place? How badly do you want your closing costs covered by the seller? How bad do you feel if you lose it to another buyer?

If you're the seller, how urgent is selling this place for you? How many other buyers are there out there for your place? How bad do you feel if this buyer walks?

The ideal deal is one in which both parties are a little unhappy, but when working as an agent for somebody, I prefer to make whomever I represent just a little bit happier than the people on the other side. Not always possible, though.

Karla Harby
Charles Rutenberg Realty
kharby@crrnyc.com

RS,

Any questions in particular I should ask? Explain the credit check process when searching for a mortgage. Can you explain the pre-approval process and the pros and cons of it?

kharby2,

You are thorough. I am looking for general information. In the early stages of the searching process. I would seriously like the closing cost covered by the seller, but is prepared not to have the closing cost covered by the seller. If I find this is my dream home, I would feel terrible, if I lost the deal to another buyer.

Quote of the Day!

"The ideal deal is one in which both parties are a little unhappy, but when working as an agent for somebody, I prefer to make whomever I represent just a little bit happier than the people on the other side. Not always possible, though."

The ideal deal is when both sides are happy.

mutombonyc. the pre-approval was a long time ago for me. I don't recall it being a big deal. I think pre-approval is a little over-rated, both for buyer and seller. I do think it's very important to go over every cost on the mortgage application. You may wind up saving hundreds of dollars.

As far as closing costs covered by seller. Just look at your total money out.

Last week, a slow week, I spoke with one broker who just had a townhouse deal fall through because the buyer could not obtain a mortgage. It's not unusual for apartments to come back on the market for this reason.

A pre-approval letter is not a guarantee of financing, though, because deals also fall through when the bank doesn't like the building, and so won't agree to a mortgage. Sometimes this happens very late in the process. It almost happened to me recently; the buyer was golden but the out-of-town bank wouldn't approve the building and didn't know how to get the paperwork it had to have. This was about a week before the supposed closing date. We got the paperwork, and the deal went through.

The first question I ask a prospective buyer is if they have a pre-approval letter. If not, I urge them to get one. In the meantime, they can go to open houses to get an idea of what the market is like.

The letter I'm looking for is not the same as a verbal chat with a banker who says, "Yeah, that sounds good, I think you should be able to do that." It's something in writing. Sometimes the seller's attorney will ask to see a copy.

I will probably get flamed for posting my outside link, as this board has become so nasty -- but that's why I have my fireproof suit :) . I have posted an article I wrote about pre-approvals up on my blog, so now I can send buyers there without having to email an attachment. If you follow the link below, you too can read it.

One more thing: Some, not all, mortgage brokers want to know about the building under consideration as well as information about you. So if you have some idea what you want, that could be helpful.

http://gothamcityhomes.posterous.com/how-and-why-to-get-a-pre-approval-letter-from

Karla makes sense. NO point in bidding for something you clearly will not qualify for.
Still think an intelligent person can look at mortgage payment verse their take home pay and figure it out.

I agree with riversider that there are plenty of other ways to see how much you can cover each month. Although i did got through the preapproval process to see what i qualified for, I never got the official letter. It did make the mortgage process quicker as they already had all my info and just needed my support.

I would think giving a pre approval letter stating what you qualify for is a mistake in negotiations. Why do i want a seller to know i can get a 1 million mortgage if i am trying to get the price down. Or you have to play the game of asking the mortgage broker to give you a letter with a lower value then you actually qualify for.

but to the original point of this line of questions, mutombo as a buyer the selling costs are covered by the seller. He will have to pay the broker, the transfer taxes, any fees in their building, etc. You will always be responsible for your costs such as mortgage fees, title, mansion tax, etc. So i am not sure what you are looking to negotiate regarding these fees.

Mikev,

Thanks for your input. On SE, and bust I have read and heard people say "I negotiated closing costs with the seller". I wanted more input on negotiating closing costs with the seller. Thanks for the information regarding the pre-approval letter. I do agree with RS & Mikev, regarding your views on the pre-approval letter, which I feel can be a reversal of fortune. Can anyone shed light on a multi-dwelling house which is of interest to me?

I disagree with Mikev and RS on the importance of the pre-approval letter, especially given how many people have trouble with financing in the last couple of years. If I were a seller, I would be more willing to negotiate on the price if I'm confident the deal will close. If the deal fails to close, the market could be lower at that point and/or I'm more desperate to sell because I need the money to buy something else or pay off debt.

That's just it Sunday. A pre-approval letter is not a guarantee. If I was a seller, that logic would work better with an all cash deal.

RS, it's all relative. Cash is better than pre-approval, but pre-approval is better than nothing. I thought you and Mikev are saying don't bother with the pre-approval.

Sunday, getting the ball rolling is a good idea. And some information is better than none. My point was not that it had no value, only that it's value may be over-stated a bit.

RS, that might be true a few years ago, but I think it's very important now unless it's a cash deal like you said.

Sunday I did not say do not do it. i said it was great in the follow through, the bank had all my info and just had to get them support to get to the mortgage phase.

My point was to get a letter stating you can get 1 million in financing and giving it to a broker is to me a kiss of death with negotiations. i would rather a seller feel i qualify, but not know the extent during negotiatons.

I was actually advised to get preapproved, which i did, but not get a letter until i bid. then have them issue one close to what i was offering.

And i think pre approval letters are slightly overstated in value even now. I could qualify, but in the meantime could go on a spending spree and the bank may want to lend me less because lets say i got anew credit card and am carrying a balance.

the only guarantee is when you are closing and the bank actually funds the loan.

So...let's say the bank pre approves for $1.2 million mortgage. You're bidding on a property thats listed at $1 million. How does that hurt your negotiating position?

Mikev, in CC's example, I would have more confident in the bidder with a $1.2mm pre-approval letter than one who has a $1mm pre-approval letter, for the reasons that you stated above. Perhaps the bidder did went on a spending spree, but more likely, perhaps the apartment appraised for less, and therefore more down payment was required to close. The one with the $1.2mm pre-approval has a better chance of closing. Yes, it's not a guarantee, but I would give the bidder with the 1.2mm pre-approval a better discount for the better chance the deal would close.

Mikev,

"I was actually advised to get preapproved, which i did, but not get a letter until i bid. then have them issue one close to what i was offering."

I like this action!

Sunday, I disagree. Just because i qualify at 1.2, not the 1 million asking, does not mean i have a better chance of closing. Once you qualify, you qualify, conditions change all around.

But to me it hurts my negotiation, because if i am saying this is all i can afford at say 1 million and they are asking 1.1 million, if all of a sudden i give them a letter saying 1.2 million, what does that say. The point is i may actually only be able to afford 1 million because cash on hand to put down, but the letter says the bank is willing to lend up to 1.2. May force a seller to think they can get more out of you. negotiation over because neither side will yield.

Now that is the extreme. but really at the end of the day, the bank said i could afford 1.2 million, of course they really do not take into account what cash you have, it is purely based on income level. in actuality i could afford about 1 million, based on cash i had and cash i wanted left over.

so really preapproval is a waste of time in the sense of it is what you can lend at the max, not what you qualify for.

meaning you negotiate in good faith and then find out buyer actually could not get a 1 million mortgage even though the letter said yes.

Mikev, clearly I'm wrong if you're the seller and vice versa.

Sunday-Even though I am a buyer, I 100% agree. If you are selling an apartment listed at 1mm and one buyer offering 920k qualifies for a 900k mortgage and another buyer offering 915k qualifies for a 2mm mortgage you go with buyer 2. As a seller, you want to get the best price, but you want to make sure the buyer can actually close. The seller doesn't care what you can afford. They want the best deal that that will close. Time is of the essense.

mutombonyc-"negotiating closing costs" happens more often at new developments, where the sponsor will pick up some of your closing costs in lieu of giving an actual discount off list price so a higher sale price will show up on ACRIS and not hurt later sales. It also occurs at some coops to obtain board approval for the same reason. This can be in the form of paying some of the fees associated with closing, or a lump sum given to the buyer at closing. Some of the following are examples--mortgage tax, lawyers fees, transfer tax (new developments only).

I do not disagree, i was more leaning towards if i am the only bidder. Getting into bidding war of course i would produce a letter. i do not disagree that if i had two bidders bidding close enough to same i would go with the one with the better financial condition.

However i think sellers as i was one once upon a time, want the most money they can get. I am sure my judgment would have been clouded if someone was offering 50k below ask, which may be reasonably priced and give me a preapproval letter for 200k more.

As to negotiation of selling costs, i just bought a new condo and most of my discount is better in the sponsor covering my closing costs.

I can't see as a regular seller i would cover any of the buyers fees as i am already covering enough of my own.

I have another question, an asking price of 500k and sold for 250k and vice versa, how and why does this happen?

On the going for cheaper, insider sales, estate sales, need to sell for cash, etc.

The other way around, I don't see that as much...

somewhereelse,

Thanks :-). How are you this lovely Monday?

Can you explain your post in greater detail?

"I have another question, an asking price of 500k and sold for 250k and vice versa, how and why does this happen?"

If you're in the early stages of your search, I'd be more concerned with negotiating a good price than just focusing on the closing costs. In the end, even if you pay all closing costs, they shouldn't amount to more than ~5%. That other 95% is more important to your bottom line.

bjw2103,

Thanks, I totally agree with you. Can you shed light on this situation?

"I have another question, an asking price of 500k and sold for 250k and vice versa, how and why does this happen?"

As tempting as it is to look at an asking price of $500k and a sold price of $250k and immediately say, "What a deal!", I don't think that's always the wisest approach. It might be a great deal, but it may also be nothing to write home about and yet another case of an overly ambitious seller/broker listing at an unrealistic price. I will say it's highly unusual for a discount from list to be 50% (even in new development, where you're more likely to see ambitious lists). Your best bet is to find good, recent comps to determine if you're getting a "good deal" or not. It's not perfect information, but it's better than nothing, and I find it's always better to come to the negotiating table with some ammo rather than none.

What ammo would you be referring too and good, recent comps?