Three Ways to Save Thousands Buying U.S. Real Estate

Save Money When Buying U.S. Real EstateEvery day more and more Canadians are making their first U.S. real estate purchase. According to a recent study by the National Association of Realtors, Canadians made up the largest share of foreign purchasers of U.S. real estate (24% of all international sales). This is great, but the trouble is, there are a lot of assumptions and many Canadians do not factor in all of the costs involved with buying U.S. real estate.

Last month we published an article on the 11 Costs to be Aware of Before Buying U.S. Real Estate. This month, we want to help you save potentially thousands of dollars when buying U.S. real estate. Let us know if you have any other ideas to save money.

1. List price does not mean offer price

When purchasing a home, buyers should always keep in mind that the list price is not essentially equivalent to the offer price. This is where the power of the negotiation takes place. There are many ways that you can haggle with the seller by taking advantage of some of the things that you have observed in the property. When you see the property , you may spot some areas that need to be repaired. This is an important haggling point that you can take advantage of against the seller as you would be spending more money for the fixing up as opposed to just literally moving in.

Aside from that, other factors that come into play include multiple offers that result in inflated prices. Many of these offers are actually just that, offers. Few if any actually are going to decide to actually purchase the property. If you see yourself as a serious buyer to the property in question, you can negotiate with the seller that you are serious about putting a down payment and therefore they should be able to adjust the price some more to what you are comfortable paying. A lot of sellers also tend to overprice because they anticipate that they might get lucky with a buyer that would be willing to accept the list price as is. However, doing so would be costly and impractical as buyers can always present an offer of their own in order to save money. If the property you are intending to buy is a foreclosed one, you can still negotiate with the bank as they are looking to quickly dispose of it in order to somehow recover part of their losses.

Another reason why you cannot undermine the value of negotiating for a lower price than what is being posted as the list price is the fact that in an economic downturn, the decline in market value of the property is due to lesser-interested buyers. This results in an oversupply of property and just merely applying the law of supply and demand. More supply means more opportunities to get lower prices for the home.

2. Closing Costs – Paid by the seller

There is nothing that can kill the excitement of purchasing a home more than discussing who will pay the closing costs on the property. Usually both the seller and the buyer pay part of the closing costs of the transaction. However, you as the buyer have the upper hand to ask the seller to shoulder more of the closing costs in order to sweeten the deal so to speak. The exact amounts of closing costs actually differ from area to area and this amount basically depends on the offer and the counter offers that occur during the transaction process.

In order for you to have more leverage against the seller, it is important that you do some necessary research on the area where the property is located to ascertain what the general practice regarding closing costs are and also to be informed about laws and guidelines for such. There is nothing wrong with actually asking the seller to pay the closing costs in order for you to save money. This is again part of the negotiation process and should not be overlooked by overzealous or uninformed buyers. As a guide here are some of the costs that are normally shouldered by the seller and buyer. It is up to you to haggle with your vendor so that you would be able to save on your overall costs.

For Buyers:

  • Mortgage fees
  • Inspection fees
  • Transfer taxes (seller may offer to shoulder this or can be shared)
  • Homeowner’s insurance (valid from 1 year from date of closing)
  • Title insurance and escrow fees (can vary depending on location)
  • Attorney’s fees ( if there are any legalities needed)

For Sellers:

  • Real estate commission (buyer might shoulder some of this)
  • Termite repair fees
  • Loan payoff fees
  • Title insurance (varies with location)
  • Cash payments in lieu of necessary repairs to the property
  • Transfer and escrow fees
  • Attorney’s fees

3. Go all Cash – Refinance later

Talk about how all cash offers are better viewed then financing ones.

If you do not want to get burdened by mortgage payments every month, you may want to opt for paying in cash. If you have the capital, paying in cash can actually save you a lot of money in the long term. Cash payment for the property puts you in the driver’s seat to negotiate for a much lower price than what is offered. Sellers typically cannot resist the allure of a buyer ready to part with their hard earned cash.

Buying in cash means that you can close the deal quickly especially if there are other buyers that are also looking into the property. It usually takes about thirty days for a financed purchase to push through which means other buyers can beat you to the punch if you have not gotten approval for your financing yet.

Of course, the use of leverage in the Real Estate Investment is always key. Once the property is closed, many lenders will look at the market value of the property 6 months after you closed on it as a “refinancing”, not a purchase. What this means for you is that instead of using your purchase price (and if it was a distressed sale, you most likely paid under market value), using market value may allow you pull out as much as you paid for the deal, leaving equity as well.

With this excess cash, I would recommend to purchase more income sources to increase your portfolio.

If you’re thinking of purchasing U.S. real estate and would like to know how we can help, feel free to contact us for more information.

Interested in U.S. Real Estate? Sign up for our VIP Mailing List.