Money Management

You may be able to negotiate on a listing price for a home. Read on to see how. 

The National Association of Realtors (NAR) reports that the median price for an existing home sold in March was $375,700. That’s a decline of 0.9% from a year prior. But let’s remember that home prices were also very elevated in early 2022, so a modest dip does not by any means make today’s home prices affordable.

A big reason sellers are asking for higher prices these days is that real estate inventory is very low. As of late March, there was only a 2.6-month supply of homes on the market, per the NAR. And it can easily take a four- to six-month supply of homes to even out the housing market and make it so there’s enough inventory to go around.

If you’re looking to buy a home, you may end up finding a place that’s suitable in theory, but is just outside your price range. And because mortgage rates are higher these days, you may not have the leeway to pay more.

If that’s the case, all isn’t lost. You might still be able to negotiate with a seller and get them to come down on price. Here are three strategies you can use.

1. Offer to pay in cash

It may be that your preference is to finance your home purchase with a mortgage loan, but you have the option to make a cash offer thanks to a lot of savings or something like an inheritance. If so, you might manage to get a seller to lower their price if you agree to pay in cash.

That’s because cash transactions are more of a sure thing. Your seller won’t have to worry about your home loan falling through, nor will they have to worry about delays in finalizing your mortgage.

2. Point out flaws — politely

No home is perfect. But if you’re looking at making an offer on a home that clearly needs some work, you can use that as a talking point when negotiating price.

Be careful, though. Many sellers take pride in their homes, and you don’t want to come off as insulting.

When you highlight a home’s flaws as a negotiation tactic, do so gently and discuss things from a financial perspective, not an aesthetic one. In other words, rather than point out that all of the flooring needs to be replaced because it’s worn and dingy, simply discuss the cost involved in having to update it.

3. Tug at your seller’s heartstrings

Perhaps the neighborhood you’re looking to buy in is perfect for your family, and you can see your kids really enjoying their childhood in the home you’re thinking of buying. If you try to appeal to your seller by stating all of that but explaining that the home is just a bit outside your budget, they may agree to a reduction in price.

Although sellers continue to have the upper hand in today’s housing market, that doesn’t mean you can’t negotiate at all. So if you find yourself in a situation where you want to make an offer on a home but the price doesn’t quite work for you, use these tactics to see if you can get that number lowered.

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I’m going to be applying for a mortgage soon, but I’ll decide on my own how much I’m comfortable spending. Read on to find out more. 

I’ll be buying a new house soon and I’m going to get pre-approved by a mortgage lender. I’m getting pre-approved because I know that when I go look at houses, the sellers are going to ask for proof of mortgage pre-approval before I can schedule showings. I will also need to provide proof of pre-approval when I make an offer on a property.

Sellers require this because they want to make sure I can actually afford the purchase. They don’t want to waste time showing the house to someone who can’t actually buy it. Pre-approval helps them confirm that I’d be a qualified purchaser.

But while I know I need pre-approval and will definitely be getting it early in the process, I don’t really care how much I am pre-approved for. Here’s why.

This is the simple reason my pre-approved amount doesn’t matter to me

When I get pre-approved by a mortgage company, my mortgage lender is going to tell me how much I am allowed to borrow. But this will have no bearing on my decision about how much to spend on a house.

There’s a simple reason why I’m not interested in learning the maximum amount of money my mortgage company is going to make available to me. I’m not going to let my mortgage company decide for me how much I can afford, because my mortgage company doesn’t know about my financial goals.

See, mortgage lenders typically allow you to borrow as much as they think you can feasibly pay back without a risk of default. Their goal is to collect as much interest as they can from you without risking you not being able to pay.

I don’t necessarily want to spend the maximum permissible amount on my house, though. I would rather not overextend myself and stretch to make mortgage payments. I don’t want to devote that much of my money to housing costs when I want to be able to spend a lot on travel and other goals besides just purchasing a home.

Here’s how I’m deciding how much house to buy

Rather than letting a mortgage lender decide the amount they think I can afford, I have done my own mortgage calculations based on how much I feel is comfortable within my budget. I’ve looked at my income, my savings goals, and my other expenses. Using this information, I’ve decided how much I am comfortable actually spending on a monthly housing payment.

Once I had this info, I was able to work backward from there to decide how much house I could actually afford to keep my mortgage payments within the limits I set for myself. As long as my mortgage lender pre-approves me for at least that amount — which it will, since I’m being conservative in how much I am willing to take out — I don’t care how much they will let me borrow.

I’m going to stick to my limits and leave the rest of the money they’d be willing to lend me unclaimed. Doing that is simply better for my long-term goals and for my peace of mind.

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It’s not necessarily a great time to be borrowing money. Read on to see why. 

In March, the national unemployment rate was 3.5%, which is comparable to where it was prior to the pandemic. But will the jobless rate remain low for the rest of the year? One financial company thinks not. And that’s why you’ll need to be very careful about borrowing money in the near term.

The jobless rate could tick upward

In a recent report, Vanguard said it foresees the U.S. unemployment rate rising to 4.5%–5% by the end of 2023. Now for context, the jobless rate was three times that high in April of 2020, when the pandemic first took hold and millions of workers lost their jobs practically overnight. But still, that would represent a notable uptick in unemployment. And that’s what makes now a pretty precarious time to be borrowing money.

As such, if you’re thinking of signing a personal loan, or any other loan for that matter, you may want to pause and assess your job and financial situation. First, consider the reason you’re borrowing money. If it’s to address a home repair you’ve been putting off, you may be able to make the case to take out a loan. But if you’re looking to renovate, that may be the sort of thing that can wait.

Next, think about your savings account balance. Do you have money in the bank you could pull from to make your personal loan payments if you were to lose your job? If not, you may want to delay your plans to take out a loan.

Finally, think about your job and industry. If you’re a teacher, your job may be fairly secure even if a recession hits and the unemployment rate ticks upward.

But if you’re a marketing professional for a retail company, it’s a different story. If more people lose their jobs, they’re likely to spend less. That’s the sort of scenario that might impact your company’s finances, leading to cuts. And it’s possible that your job could end up on the chopping block, even if you’re great at it.

It’s not a great time to borrow in general

A potential uptick in unemployment levels isn’t the only reason to think twice before taking out a personal loan today. Another reason is that borrowing rates are higher on the heels of the numerous rate hikes the Federal Reserve has implemented over the past year and change.

Now, one thing you’ll often hear about personal loans is that they can be an affordable way to borrow, especially if you have great credit. But right now, you might get stuck with an interest rate you aren’t happy with, even if your credit is excellent.

All told, there’s a lot of uncertainty when it comes to things like unemployment and a potential 2023 recession. And at a time like this, holding off on borrowing may be your best bet if your need for money isn’t absolutely pressing. Some people may not be able to wait to take out a loan. But if you’re in a different boat, putting off a big home project or purchase could end up being a savvy move if your personal financial situation worsens later on this year.

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You don’t need to own whole shares of stock to benefit from dividends. Read on to learn more. 

When publicly traded companies make money, they can either choose to reinvest their profits in the business or share it with stockholders. When they opt for the latter, it results in dividend payments.

Companies aren’t required to pay dividends. A given business could make a series of dividend payments and then halt that practice. On the flipside, there are some companies that not only pay dividends consistently, but raise them over time. In fact, there are several companies that have increased their dividends for at least 25 years in a row.

You may be interested in holding dividend stocks in your brokerage account. But what if your brokerage allows you to buy shares of stock on a fractional basis?

Rest assured that even if you only own shares of stock on a fractional basis, you can still collect dividend payments. Your payments, however, will be calculated proportionately.

Dividends provide extra money to invest or enjoy

The great thing about dividend income is that it’s extra income. You can cash out your dividends if you choose and spend that money — whether on fun things, like concert tickets, or essential bills, like your mortgage. But if you don’t need the money, it’s generally a good idea to reinvest your dividends so you can grow your portfolio even more. Many brokerage accounts allow you to set up an automatic dividend reinvestment plan so the process is seamless.

If you own shares of stock on a fractional basis, you’ll receive a proportionate share of dividends when they’re paid. So, let’s say a given company pays a $20 quarterly dividend per share of stock. If you own half of a share of that company, you’ll get a $10 payment when dividends are issued. If you own one-fifth of a share, you’ll get a $4 payment. But either way, you’ll get your money.

Is it worth investing in dividend stocks?

With dividend stocks, you can make money two ways — via those dividend payments, and via share price appreciation over time. It can definitely be worth it to invest in dividend stocks if the businesses behind them are strong and have a lot of growth potential. But it’s generally not a great idea to buy stocks just to collect the dividends they’re paying.

For one thing, companies can always choose to cut their dividends or stop paying them over time. Also, a higher dividend is not necessarily indicative of a company’s financial strength.

In fact, you could make the argument that dividend stocks aren’t poised to grow as much as non-dividend-paying stocks, because those companies are giving out money to shareholders rather than using it to grow the business. This isn’t always the case, and plenty of companies that pay dividends do experience their share of growth, but it’s a fair point.

As a general rule, it’s important to research any individual stock you’re thinking of owning. So if you’re drawn to a larger dividend, dig into the company’s financials and make sure it really is a good buy.

All told, dividend stocks could be a nice addition to your portfolio. This holds true whether you buy shares in full or invest on a fractional basis.

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Paying cash for a home could be a smart move, but also, a risky one. Read on to learn more. 

Most people who buy a home can’t afford to pay for it in cash outright. That’s what mortgages are for.

But in a recent survey by Today’s Homeowner, 54% of first-time home buyers made a cash offer on a home.

That number is surprising given that home prices have been so elevated. And to be fair, it’s also higher than numbers reported by other sources.

But still, it’s fair to say that a large number of new home buyers sought to purchase their properties without a mortgage. The question is, does it pay for you to go that route if the option exists?

The upside of making a cash offer

Perhaps you have the option to buy a home in cash because you have a lot of money in your savings account or are sitting on an inheritance. The benefit of buying a home in cash is not having to deal with the process of getting a mortgage, which has the potential to be time-consuming and stressful.

Also, by not having a mortgage, you don’t lose money to mortgage interest. And, you might be able to close on your home much sooner because you aren’t waiting for a lender to finalize your paperwork.

Plus, in a tight real estate market that lacks inventory, which is what today’s market looks like, being a cash buyer gives you an advantage over the competition. Sellers know full well that mortgages have the potential to fall through. So they’re often more eager to work with cash buyers, knowing that the money to pay for the home is there.

The downside of making a cash offer

When you buy a home in cash, you’re generally parting with a lot of cash. But then that’s cash you won’t have available to you for other purposes.

What if you empty out your savings to buy a home in cash a few years before your kids are set to start college? You might end up being unable to help them pay for an education, forcing them to rack up costly educational debt.

Plus, when you apply a lump sum of cash to a home purchase, you lose the opportunity to invest it elsewhere. And if you tie up too much cash in a home, you might end up stuck if your situation changes, such as if you lose your job, want to change careers, or feel the need to renovate.

What’s the right call?

Clearly, there are pros and cons to paying for a home in cash. Before you decide what to do, think about what you stand to gain and lose by going this route. You may also want to talk to a financial advisor to see what they say given your goals and other circumstances.

An advisor might tell you not to buy a home in cash because they think your long-term savings need a boost. Or, they might tell you that since you have a robust IRA balance, you’re free to pump a few hundred thousand dollars into a home purchase. But it pays to have that conversation either way.

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As expensive as summer vacations can be, winter travel can be worse. Read on to learn how to use one to pay for the other with rewards cards. 

Most of us tend to do the majority of our traveling during summer vacations and winter holidays. The reason for this is both social — school and family — as well as practical: Travel is expensive, and it can take you a couple of seasons to save up for the next trip.

But what if it didn’t? What if you could use that pricey beach vacation to also cover your Thanksgiving back home?

Well, you can. With a little strategy and planning, you can use points earned with rewards credit cards to pay for the flights, hotel rooms, maybe even the rental car on your winter travels. At the very least, you can give yourself (and travel budget) some breathing room by covering one or more of your major expenses.

How it works

Summer vacations come with a lot of costs. Airfare alone has gone up more than 17% over the last year. Even if you don’t fly, booking a hotel can be a huge expense. While that’s bad for our budgets, it’s good in terms of earning rewards. The more you spend, the more you earn.

When you do all that travel spending on a credit card that earns 3X to 5X points per dollar on travel — well, you can see how that can add up fast.

But that’s not even the best part. Open one or two new travel rewards credit cards before you start booking your summer vacation. Then you can use your vacation expenses to earn some sign-up bonuses. These big bonuses are your ticket (I couldn’t resist) to traveling for free.

Picking the right rewards credit cards

You have a few choices for how you can approach choosing a rewards card. If you regularly use the same hotel brand or airline, consider a cobranded hotel or airline credit card. These cards earn rewards that go directly into your loyalty or frequent flyer account. They can also have nice brand perks, such as hotel cards that come with elite status.

Alternatively — or additionally — you can get some extra flexibility with travel rewards cards that earn transferable points. Here are four of the most popular programs:

American Express Membership RewardsCapital One Venture MilesChase Ultimate RewardsCiti ThankYou Rewards

Rewards points from these programs can be transferred to different airline and hotel loyalty programs. For example, you could transfer your Chase Ultimate Rewards points to the World of Hyatt program to book a free hotel room.

Transferable rewards have more flexibility, since they can be transferred to multiple partners. However, once you transfer them, there’s no going back, so only do so when you’re ready to book.

Other considerations

While the rewards themselves are important, there are also other things to consider when choosing the cards you use to pay for your summer travel. The annual fees, for instance, can be a barrier to some of the cards. Unfortunately, many of the best sign-up bonuses come from cards that also have annual fees, so it’s a delicate balance.

And then there’s the bonus: Sign-up bonuses generally have spending requirements. Ideally, you can meet the whole requirement easier with what you were already going to spend on your summer vacation. If not, however, you need to think about how long it will take you to earn the bonus.

The sooner you can get your hands on your rewards, the better. Booking award travel can be tricky at the best of times — and the busy winter holiday season is definitely not the best of times. Booking sooner is almost always better when it comes to peak travel times, and you typically need your points already in your account to complete a booking, so come prepared.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Citigroup is an advertising partner of The Ascent, a Motley Fool company. American Express is an advertising partner of The Ascent, a Motley Fool company. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Brittney Myers has positions in American Express. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool recommends Hyatt Hotels. The Motley Fool has a disclosure policy.

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