10 Real Estate Costs That Are Always Negotiable

A house is a big-ticket item—indeed, buying or selling one may amount to the biggest transaction of your life. So you ought to be aware that with smart negotiation, you can reduce costs, no matter which side of the deal you’re on. Though real estate contracts are complex and often intimidating, you could save tens of thousands of dollars by knowing what aspects are negotiable and working them to your advantage. Save big bucks on home sale transactions—on both sides of the deal—with these wise negotiating techniques.

Get It in Writing

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Real estate negotiations

When it comes to getting the best real estate deal, never settle for a handshake; every agreed-upon aspect must be in writing. The three main contracts involved in the home buying and home selling process are the Listing Contract, the Sales Contract, and the contract a buyer signs with a bank or lender. Parts of all three of these contracts are negotiable.

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Listing Commission

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negotiate real estate listing commission

As a seller, you stand to pay a huge chunk of the proceeds from the sale of your home to a real estate listing agent. The good news is that agent’s commission is negotiable, according to the National Association of Realtors. Most real estate listing agents ask for five to seven percent of the home’s sale price, but it’s not written in stone. If you tell the agent that you will only agree to a lower commission, she will oftentimes come down one percentage point.

Related: 10 Things You Never Knew Your Real Estate Agent Can Do for You

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Sales Price

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Negotiate house sales price

The biggest point of negotiation (dollar-wise) often takes place while a buyer and a seller are trying to settle on a fair price. The buyer makes an offer, which is often lower than the seller’s asking price, and the seller may then accept the offer or make a higher counter-offer. The process continues until both parties either agree on a price, or one party bows out. The buyers’ offer may be more successful if they can show they’re already pre-approved by their lender for a loan, and sellers might want to point to the prices of recently sold similar homes to show that the house is well within an acceptable price range.

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Earnest Money

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Earnest Money bargain

The amount of money the buyer pays up front as a show of good faith is known as “earnest money.” If the deal falls apart later because the buyer finds another house she likes even better, the seller gets to keep the earnest money. While the average amount of earnest money is often one to two percent of the home’s value, it’s in a seller’s best interest to negotiate for more. Depending on how badly the buyer wants the house, she might also benefit from offering more earnest money to show the seller a serious level of commitment.

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Mortgage Rate

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Negotiate home mortgage rate

The mortgage rate is the amount of interest a lender charges on a home loan, and these days it ranges from around 3.1 percent to 3.7 percent, although it can vary from one lender to the next. Many homebuyers miss out here because they don’t realize they can reduce the interest rate on their home loan. According to financial guru Motley Fool, along with maintaining a good credit rating and not taking on too much debt, you can ask your bank or lender to match the lower rate of a competitor. Getting a mortgage rate reduced by as little as 1/4 of 1 percent can save tens of thousands of dollars over the life of a mortgage.

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Property Taxes

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Research property taxes

Property taxes are paid yearly to the county based on the value of the property. While you might not be able to reduce the property tax on a house at the county level, you can negotiate whether the buyer or the seller will pay outstanding taxes for the current year, or for past years if the seller is behind on payments. Often, the seller pays the amount of property taxes accrued to the date when the house closes and the buyer pays the amount from that point on, but there’s no hard, fast rule, so don’t be afraid to ask the other party to pay more of the property taxes as a condition of the sale.

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Buyer’s Agent Commission for FSBOs

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Negotiate FSBO fees

If you’re going the for-sale-by-owner (FSBO) route, don’t be surprised if you’re approached by a real estate agent who would like to show a potential buyer your home. When this happens, the agent will ask you to sign a “one time showing” contract, where you’ll agree to pay the agent a commission if she sells your home. Since this agent will only represent the buyer, she may agree to half of a full commission, or 2.5 to 3.5 percent of the sales price.

Related: 15 Things Not to Say in Your Real Estate Listing

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What Should Stay and What Should Go

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Negotiate sale of furnishings with home

Real estate contracts can include virtually anything the buyers and sellers want to add in. If you’re a buyer and you like the sofa and love seat in the family room, you can ask for it when you make your offer, even though furniture normally goes with the seller. The opposite is also true: Most listing contracts specify that lighting fixtures will stay with the house, but if you have an heirloom chandelier, you can stipulate that it will be removed prior to closing.

Related: 7 Employers Who Want to Help You Buy a House

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After-Inspection Repairs

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Negotiate repairs after home inspection

It’s standard practice for a mortgage lender to order a professional inspection of the property to ensure that the house is in good condition. Most of the time, the buyer pays for this inspection, which usually runs between $350 and $600 and is charged to buyer at closing. Nothing is stopping the buyer from asking the seller to pay for the inspection, however, particularly for specialized inspections for such conditions as lead-based paint, asbestos, or mold.

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Inspections

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Negotiate home inspection fees

Most sellers spruce up their homes and make repairs prior to putting the house on the market, but houses can have material defects that are unknown to the seller, such as an undersized electrical panel. If these issues are discovered by the inspector and expensive repairs are required, the buyer and seller can negotiate who pays for this. If an agreement cannot be reached, the contract can often be terminated.

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Closing Costs

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Negotiate closing costs

The fees charged by mortgage companies and title insurance agents to finalize the sale of a home can be steep. They often run about two to five percent of the loan amount, or up to $15,000 for a $300,000 house. These costs are often split evenly between the buyer and the seller, but either party can ask the other party to pay more or all of the closing costs.

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