Part II: Buying a Home with Your Parents Involved
Did you start reading the mini series on Buying a Home with Your Parents a few weeks ago? We started off chatting about the general differences between when your parents bought and now and some of the questions you might hear from them. In Part II of the mini series we’re going to dive a little deeper into managing the expectations of your parents when you are making offers and negotiating on a home.
Many of the buyers I’ve worked with this year have had some sort of parental involvement. Some parents have contributed financially while others have been on the sidelines offering advice. Each of my buyers have felt differently about their parents’ participation; some greatly appreciate the additional guidance while others would prefer one less cook in the kitchen. Either way, parents typically love to be somewhat involved in the purchase of their child’s home, which can be a little stressful. The best way to reduce that stress is to educate your parents the same way you are educating yourself about the market of today. Like I said in Part I, things are a little different since they purchased their homes. Before we dive too deep, remember that your parents typically give you advice on the purchase of your home because they love you and want what’s best for you. It can be hard to remember that when you're trying to be an independent adult. Okay, now that I put that reminder out there we can get to the point. It is likely that the last time your parents bought a home the market was very different. The market previously allowed for stiff negotiations from the buyer’s side of the deal. You could look above your price range, offer lower than the home was listed for, have a full inspection and ask for closing costs. Man, don’t we all miss those days?! In today’s market the landscape looks a little different. With more buyers than homes for sale, sellers have the opportunity to be pickier and the competition is stiff! We’re seeing everything from offers tens of thousands above the original asking price to buyers completely waving inspections - all in the hope of becoming homeowners. So, unfortunately for now, the days of full covered closing costs and starting below the asking price are gone. Your parents will likely be shocked by this and you’ll have to educate them on the new market status. Some of the contract terms that worked a few years, when there were more homes on the market than people who could buy them, are no longer available to put into play now. The market has changed and that means the strategy for buying has to change too. Make sure you and your parents understand what it is taking for buyers to get a home in your area in this market. Having a game plan and limits set ahead of time will also help everyone feel more confident in the purchase offer. You’ll likely have to start out looking at homes below your intended price point to give yourself the wiggle room to offer up to your maximum purchase price. I know, it's not exactly what's happening on HGTV but this is the current status quo.Before you and your mom kick off your search there are a few things you should chat about.
Major points to discuss ahead of time:
- Starting purchase price
- Final purchase price
- Amount you are willing to go above list price
- Amount you are willing to go above another offer
- If your parents are kind enough to chip in - available cash and how it can be used in your home purchase
- Length of time you plan to live in your first home
- Thoughts on your willingness to forego the home inspection
- Whether you are flexible on your closing date
Look for Part III coming next week!
Happy Hunting,
