Happy House Hacking Podcast EP 43: Stop Overpaying: 7 Buyer Secrets to Drastic Home Savings Now!

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Stop Overpaying: 7 Buyer Secrets for Drastic Home Savings 

Embarking on the journey to homeownership, especially as a first-time home buyer, is an exciting milestone. Many people believe that buying a home is solely about the sticker price, but this overlooks a wealth of opportunities for significant home savings. Understanding the negotiable aspects of a home purchase can empower you to make smarter financial decisions and secure a home that fits both your dreams and your budget.

At The Schwaegerle Team, we believe informed buyers are empowered buyers. We're here to help you navigate the path to happy homeownership, ensuring you're aware of every chance to save big. In a recent episode of our Happy House Hacking podcast, Owen and Camille Schwaegerle jumped right into these often-overlooked negotiable items. Learn how you can achieve substantial first-time home buyer savings by understanding price and terms.

1. Negotiating Your Mortgage Rate for Home Savings

Many buyers mistakenly believe mortgage rates are fixed, but they're often negotiable, offering massive home savings over the life of your loan. A common pitfall is relying solely on online home loan programs, which often provide generic pre-approvals and hide "junk fees." 

As Camille explained, “What they aren’t getting is someone tailoring their mortgage quote to them and their financial needs.” Working with local lenders provides a personalized approach, transparent cost breakdowns, and the ability to negotiate. Owen emphasized this stating, "If you don't get multiple quotes, you are leaving money on the table." We recommend getting at least two, preferably three, loan estimates to compare all costs, including origination fees, which you might even get waived just by asking.

Beyond initial rates, some lenders offer incentives like free refinances if rates drop significantly. This could translate to substantial home savings, potentially $8,000 to $16,000 on an $800,000 loan, by avoiding future origination fees. When exploring different home loan programs, always shop around and carefully compare estimates. It’s a crucial step in maximizing your home savings.

2. Mastering Homeowners Insurance

Another critical area for home savings is homeowners insurance, and it's essential to understand that your insurance premiums are not fixed and can change annually. Your homeowners insurance policy is just a quote for one year, and there's no cap on how much they can raise your fee.

Because of this dynamic nature, shopping around is vital. We always suggest getting at least two quotes for homeowners insurance while you're in escrow, especially if you're in an area that requires flood, fire, or earthquake insurance.

When considering coverage, it's crucial to think about the rebuild cost. Most insurance companies suggest a minimum of $330 per square foot for coverage. However, Camille advised, “If you are buying a home that is maybe updated with very high quality fixtures and furnishings, you’re probably going to want to raise that by a couple hundred dollars…because that’s the amount of money you’re going to get back from them in order to rebuild your house.”

Additionally, you can adjust your personal property coverage based on the value of your belongings. If you inherit furniture or find great deals, you might not need extensive coverage for personal property, which can lower your premium. 

Diligent shopping and home buying negotiation around homeowners insurance is a significant source of first-time home buyer savings. Regularly reviewing your policy annually is crucial to manage potential rate increases and continue to find home savings.

3. Negotiating Repairs

The home inspection process offers a prime opportunity for home buying negotiation. We always recommend comprehensive home and pest inspections, as any issues found can be used to renegotiate terms. Sometimes, sellers prefer to offer seller concessions (cash credit) rather than making repairs themselves, providing you with immediate funds for fixes after closing. 

4. Working Out the Closing Costs

Your closing costs, typically 2-6% of the purchase price, are another major area for first-time home buyer savings. Sellers can grant seller concessions to cover these costs, though not your down payment. 

You can request a closing cost credit in your initial offer or during post-inspection negotiations. We've even seen creative strategies, like one where we increased an offer to $515,000, and the sellers credited back $15,000, allowing the buyers to finance their closing costs and save their cash. Always discuss these strategies with your realtor to maximize your home savings.

5. Asking for Fixtures, Appliances, and Home Warranties

Don't overlook the potential for home savings by negotiating for fixtures and appliances beyond standard inclusions like the stove. Many items, even furniture, are negotiable, especially if sellers are motivated to leave them behind. 

As Camille advised, “We can ask for anything in an offer.” This can save you thousands on furnishing your new home. Always ask for desired appliances like the dishwasher, washer/dryer, or refrigerator as part of your home buying negotiation.

Home warranties are another valuable source of home savings, covering systems and appliances for about a year (typically $600-$800). As Camille highlighted, “The home warranties are a great way to just have little fixes done around the house,” turning a small service fee into huge savings on unexpected repairs like electrical or plumbing issues. 

Always ask the seller to cover this fee in your offer. In our experience, they usually agree. This is a simple yet effective way to achieve first-time home buyer savings.

6. Negotiating Commissions

Understanding commissions is vital to maximizing home savings. Commissions are not fixed by law; every broker determines their fee for services. It's crucial to prioritize choosing a trustworthy and effective agent over simply going for a discount broker. 

As Owen put it, “...in the absence of value, price is the only differentiator.” If an agent isn't bringing a ton of value, their fee will likely be on the lower end. We always recommend interviewing multiple agents to ensure you find someone you trust and who will do a good job for you. 

7. Discussing Broker’s Fees

With the August 2024 ruling, you now have the opportunity to ask the seller to cover your broker's fee. If a seller chooses to counter this, we can discuss strategies. Sometimes, raising your offer price slightly to cover that fee can be more financially advantageous for the buyer than bringing that cash to the table. The amount financed over 30 years is relatively small compared to the immediate cash outlay. 

Camille shared a crucial perspective on working with discount brokers: “Some of the agents that charge a very small amount, they do very little work and they’re very hard to get a hold of.” A highly motivated and experienced agent who charges a fair fee for their services will be more focused and dedicated to getting the job done well. They’ll ultimately secure the best deal and maximize your first-time home buyer savings.

Empowering Your Path to Smarter Homeownership

Achieving substantial home savings as a first-time home buyer goes far beyond the initial listing price. By actively engaging in home buying negotiation across various aspects like mortgage rates, homeowners insurance, and repairs, you can significantly reduce your overall expenses and build a stronger financial foundation for your homeownership journey.

At The Schwaegerle Team, we believe that every buyer deserves to make the smartest financial decisions possible. Our goal is to equip you with the knowledge to maximize your savings and secure the best possible deal on your new home. Don't leave money on the table – tune into the rest of our Happy House Hacking podcast for more invaluable home buying insights!