One way to make a home more affordable is to cut the price—to pay less than the seller is asking. For each $10,000 less in price you pay on a home when interest rates are running at 7 percent, you will save yourself about $75 a month (principal, interest, taxes, and insurance). Cut the price by $40,000 and you’ve reduced your monthly payment by approximately $300. That could be the difference between being able to afford the property . . . and not.
Of course, that’s not to mention the cuts you’ll also have made in your down payment and closing costs, most of which are calculated as a percentage of the purchase price. As a renter looking to buy, getting a price reduction should be one of your main goals.
Further, when you pay less, you increase the likelihood of making a profit when you later resell. Nothing makes more sense than buying low and eventually selling high.
As a buyer, it’s a good practice to not simply always offer the asking price. Consider offering less . . . sometimes much less. You might “steal” the property and end up with very low payments and little cash invested.
But how do you arrange to pay less for a house? If the seller is asking $500,000 for the property, how do you negotiate that price down to $475,000? Or even $450,000? Or $350,000?
In this chapter we’re going to look at some of the techniques used to get a better price when you buy. They can benefit any buyer at any time.