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MORTGAGE KNOWLEDGE CENTER

PenFed Mortgage with Confidence

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CONVENTIONAL LOANS

Rates starting at % (APR %)¹

 

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

  1. Home
  2. Mortgage Knowledge Center
  3. How to Negotiate in a Hot Market

MORTGAGE

How to Negotiate Real Estate in a Hot Market

EXPECTED READ TIME: 7 MINUTES

September 3, 2021

Negotiating tactics vary depending on the market. Asking for too many repairs or a lower price in a hot market could mean you lose the house. Offer too much, and you overpay. Although your real estate agent will be doing the negotiating directly with the seller’s agent — it’s good for you to know the dos and don’ts of negotiating in a seller’s market.

Hot Market Tips

  • Escalation clause — when you put an escalation clause into your purchase contract, you’re offering to pay a specific amount above the highest bid up to a certain point. Doing that can help ensure you’re the highest bidder and your bid has a good chance of being accepted.  
  • Create a win-win ­— when negotiating, it’s essential to make sure that both sides win. No seller wants to work with a buyer that wants everything and offers nothing.
  • Keep it simple — don’t ask for a lot. For example, when there are more homes for sale than buyers, you might ask the seller to pay for some of your closing costs. But in a seller’s market — that’s not a good idea when there are twenty other buyers lined up behind you.

Putting Your Best Foot Forward

Sellers and agents want to work with realtors who are professional and easy to get along with. Given two similar offers, who wouldn’t choose the more amicable agent? So, when you’re interviewing realtors, ask how they handle negotiations and stressful situations. Try and get an idea whether they would keep their cool during the challenges that come up in every transaction.

  • Stay positive — make sure your realtor doesn’t open the conversation about everything you don’t like about the property. The seller most likely knows what’s wrong with their home. Just state your price. Then see what the seller says. Let them start the negotiation.
  • Find out what’s the most important thing to the seller — price or terms. Although price is always top of the list, sometimes other things are equally important to the seller. For example, maybe they want to lease back their home for 30 to 60 days. Or possibly they want a fast close. Find out what they need and include that in your offer.
  • Keep it cool ­during negotiations and in escrow — it’s easy to get stressed out. And sometimes, it’s hard not to get into an adversarial state of mind. But if you, as the buyer, can keep a cool head, that helps everyone. And your home purchase has a better chance of moving along and closing.

Keep in mind, some of the best real estate negotiation skills are good manners.

How to Negotiate a Counteroffer — Real Estate

Having a real estate negotiation expert that knows the market and property value is vital. That’s why you’re working with a realtor instead of trying to buy a home on your own. Take advantage of their expertise and experience to make sure you don’t overpay — or offer too little and insult the seller.

When you find a home you like, sit down with your realtor, and write up an offer. In a hot seller’s market where bidding wars are the norm, it’s advisable to put in your best offer first. Otherwise, someone else will outbid you. Once you put in your original offer, see what the seller comes back with. If their response is unrealistic and too far away from what you want, you may want to walk away and keep looking.

Consider the Market Temperature When Negotiating

Sometimes buyers want to put in a low-ball bid, to begin with. Maybe they’ve been told that’s the way to negotiate. But in a hot market, that’s the absolute opposite of what you should do.

When there are more buyers than sellers and bidding wars are the norm, you’ll probably need to offer above the asking price.

Don’t Sweat the Small Stuff — Negotiate the Big Stuff

Even though there’s lots of competition, don’t overlook essential aspects of the property. You’ll want to make sure you know the condition. So even if there are items to repair that will be your responsibility, with a thorough inspection, you won’t be surprised down the road. Here are the main things to watch out for:

  • Roof — if the roof is older, make sure there’s enough life in it. Lenders don’t want to loan on a home where the roof will need to be replaced before too long.
  • Dry rot — significant dry rot is a red flag, that is, unless you’re a contractor and are looking for a fixer.
  • HVAC — reliable heating and air system are important, so make sure it’s in a good condition.

Even if you’re going to purchase the house AS-IS, it’s wise to have a home inspection, so you know what you’re getting into.

And speaking of inspections, when you get the appraisal, keep in mind that the property has to appraise for at least what you’re offering. If it doesn’t — it’s back to the negotiating table.

Speed & Timing is Everything

In a hot market, you have to work fast. That means you don’t take days to get back to a seller. And when a new property comes on the market, go see it right away. Realize there are multiple buyers for every property and you have to be on the ball if you’re going to compete. Best of luck in your house hunting endeavors!

For more information about PenFed Mortgages:
 

PenFed Mortgage: 

800-970-7766

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image

CONVENTIONAL LOANS

Rates starting at % (APR %)¹

 

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

Home Buying Steps

  • Getting Started
  • Finding a Home
  • Getting a Mortgage
  • Home Ownership

Mortgage Topics

  • VA Loans
  • Conventional Loans
  • First Time Homebuyer
  • Home Equity
  • Homebuying 101
  • Checklists
  • Adjustable Rate Mortgages
  • PenFed Top 10
  • Refinance
  • Jumbo Loans
  • FHA
  • Videos

Mortgage Products

  • Mortgage Center
  • Refinancing
  • Home Equity

PenFed HELOC

Rates as Low as % APR* with flexible use of funds

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

Disclosures

1Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on discount point, which equals percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 75%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.

*Prime Rate is % as of . The APR for this Home Equity Line of Credit (HELOC) is based on prime plus a margin and can change monthly. Fixed Rate Advances will be amortized over the Fixed Rate Advance Term, with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin, and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than % for primary residences and second homes.

  • Annual Fee: Notwithstanding the foregoing, an annual fee of $99 will be assessed on each account anniversary.
  • Home equity lines of credit (HELOC) are variable rate loans and the interest rate is subject to increase after consummation of the loan on monthly basis. Closing costs range between $500 and $8,500 for credit lines of $500,000. Contact a representative for additional details.

Appraisals: PenFed will attempt to establish value via an independent method. If that method is unsuccessful, or the value is not sufficient for the amount requested, an appraisal will be required regardless of CLTV. An appraisal is always required in the following circumstances:

For all loans with a loan amount greater than $400,000.

If an appraisal is required, it must be ordered by PenFed. You will be contacted for authorization and payment prior to ordering. Appraisal fees average $550 to $850 (some run higher).

  • Closing Cost Credit: PenFed will pay most closing costs associated with a home equity line of credit (HELOC), which includes credit report, flood certification, settlement/closing, property ownership and encumbrances search, recording, property search, and quick close. Member is responsible for any city, county, and/or state taxes if the subject property is located in FL, LA, MD, MN, NY, TN, or VA. If an appraisal is required, the member, who is responsible for the fee whether or not the loan closes, will pay the cost.

Interest may be tax deductible, consult a tax advisor for further information regarding the tax deductibility of interest and charges.

Fixed Rate Advance Lock-In You may lock in an Annual Percentage Rate for Advances during the Draw Period. During your Draw Period, you may choose to have three separate Fixed Rate Advances locked in at any one time, with a maximum of two new Fixed Rate Advances per calendar year. Each Fixed Rate Advance must equal or exceed Ten Thousand Dollars ($10,000.00) and you may not request a Fixed Rate Advance that would cause the amount you owe to exceed your Credit Limit. The only term option for your Fixed Rate Advance is 240 months (“Fixed Rate Advance Term”). However, the term of your Fixed Rate Advance cannot exceed your Repayment Period.

Fixed Rate Advances will be amortized over the Fixed Rate Advance Term with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than % for primary residences and second homes and 4.75% for investment properties.

Property Insurance: Property insurance is required.

Multiple PenFed Loans: Multiple PenFed Equity loans and HELOCs are available as long as the member and collateral qualify (except Texas). For Equity loans and HELOCs the total indebtedness cannot exceed $500,000 for all PenFed Equity and HELOCs combined.

PenFed does not lend on:

  • Mobile homes
  • Co-ops or time-shares
  • Properties that are currently listed on the market for sale
  • Commercial property or property used for commercial purposes, even if a residence is part of the property
  • Undeveloped property (land only)
  • Properties with more than 4 units

Properties that are currently under major construction/renovations: Property must be fully livable, with no safety issues. (Examples: no missing rails from stairs/decks, no open walls with wires showing, missing kitchen appliances/counters, missing bath fixtures or unfinished pool).

  • Additional limitations may apply

Home Equity Line of Credit:

  • This Account has a Draw Period of 10 years, followed by a repayment period of 20 years.
  • If only minimum payments are made during the draw period, the loan balance will not decrease.
  • In Texas, the maximum CLTV available is 80% on owner occupied properties. Additional restrictions apply in Texas, so please ask a representative for details.
  • In all other states, the maximum CLTV is 85% on owner occupied properties and second homes. Additional restrictions or requirements may apply based on application characteristics.
  • Property type of Condo has a maximum CLTV of 80%.
  • The maximum CLTV available is dependent on credit qualification.
  • Rates vary depending on owner occupancy and CLTV and other loan criteria.

Minimum Loan Amount Requirements in all States:

  • For an owner occupied property or second home the minimum loan amount is $25,000 and the maximum amount is $500,000 with a CLTV of 85% or less of the fair market value.

Other terms and conditions apply; call 844-918-4307 to speak with a representative for details. All rates and offers are subject to change without notice. To receive advertised product, you must become a member of PenFed.

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This credit union is federally insured by the National Credit Union Administration. Rates are current as of September 2023 unless otherwise noted and are subject to change.

APY = Annual Percentage Yield
APR = Annual Percentage Rate


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The content you are about to view is produced by a third party unaffiliated to Pentagon Federal Credit Union. PenFed takes no responsibility for the content of the page.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party site. PenFed Realty, LLC is wholly owned by PenFed and this referral may provide PenFed a financial or other benefit.


For more information about the relationship between PenFed and PenFed Realty, LLC, see the Affiliate Business Arrangement Disclosure.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party Website.


The content you are about to view is produced by a third party website that is unaffiliated to Pentagon Federal Credit Union. PenFed takes no responsibility for the content of the page.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party site. PenFed Title, LLC is wholly owned by PenFed and this referral may provide PenFed a financial or other benefit.


For more information about the relationship between PenFed and PenFed Title, LLC, see the Affiliate Business Arrangement Disclosure.


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