Friday, December 15, 2006

Five tips to negotiate a home purchase in today's market

Savvy buyers can still bag right home at the right price
Friday, December 15, 2006
By Robert J. Bruss
Inman News

According to statistics from Realtor, home builder and government sources, the volume of new and resale home transactions is down but the actual sales prices of individual residences hasn't changed much in recent months.

To gain the attention of home buyers, many sellers (especially home builders) are offering special incentives such as no closing costs, commission bonus for the buyer's real estate agent, mortgage-interest-rate buy-downs, and even a free vacation or plasma TV for the buyer or buyer's agent.

During this slowest home sales season of the year between Thanksgiving Day and New Year's Day, extending to Super Bowl Sunday in many communities, motivated home sellers and builders are especially anxious to sell.

Consider yourself fortunate if you are in the market to buy a home now. Mortgage interest rates are still quite affordable at around 6 percent interest. Anyone with a new or resale house or condo on the market to sell at this time of the year is probably very eager to negotiate.

NEGOTIATE WITH SERIOUS HOME SELLERS. With a few local exceptions, in most home sales markets there is an oversupply of new and resale residences available. Just ask any real estate agent for the "number of days on market" and you will discover home listings languish much longer than a year ago.

Typical answers will be 90 to 120 days. However, it is not unusual for a correctly priced home in good condition to sell within a week or two.

The supply inventory of unsold homes is higher than buyer demand. The result is "the buyer is king."

To successfully negotiate a home purchase in the current buyer's market in most cities, here are the five top negotiation tips for today's home buyers:

1. DISCOVER WHY THE SELLER IS SELLING. Having bought and sold many houses, I've learned it's critical for smart buyers to know the seller's true motivation for selling. If the seller asks, "Why do you want to know why I'm selling?" the best answer is "Because I want to make you a purchase offer that will meet your needs."

In other words, negotiate with sellers who really want to sell. Signals of serious motivation to sell include job transfer, unemployment, pending foreclosure, divorce, birth or death in the family, financial problems, purchase of another home, and retirement.

Although home listing agents and buyer agents usually try to keep the buyer and seller from meeting each other, whenever possible it is to the buyer's advantage to meet the seller before making a purchase offer.

A good question for a buyer to ask the seller (and/or the neighbors) is, "What do you like best and least about this home?" Then keep quiet and let the other party talk. Listen carefully to discover if that home is right or wrong for you.

When a seller has the attitude, "If I can get my price, I'll sell; if not, I won't sell," it's usually a waste of the buyer's and agent's time to negotiate with that seller unless the asking price is very reasonable.

However, just to be sure, if you want to buy a particular house, make a realistic written purchase offer anyway and see what happens. Some sellers act like they don't really care, but they do. When the seller makes a counteroffer (as all sellers should do in today's slow buyer's market), that indicates at least some sales motivation.

2. FIND OUT THE SELLER'S PURCHASE PRICE. But before making a purchase offer, savvy buyers ask how much the seller paid for the home and when it was purchased. If it was bought last year at the top of the market, there is probably zero room for negotiation unless the seller has a very high motivation to sell.

However, if the home was bought more than 10 years ago, there is probably lots of seller equity with which to negotiate.

If the purchase price can't be determined from the public records, and the seller refuses to tell you their purchase price, an experienced real estate agent can usually make a reasonably accurate estimate based on the purchase date. For this reason, it is important for home buyers to always work with a buyer's agent who knows the community.

3. FIND OUT THE SELLER'S DEADLINE TO SELL. When a seller is motivated by a deadline, such as a job transfer date or the scheduled closing date on another home, such a deadline can be powerful motivator.

In addition, buyers should inquire of their buyer's agent when the listing expires. If the listing expires in the next few weeks, the listing agent will usually be extremely cooperative and motivated to get the home sold fast.

However, if the seller has no specific deadline to sell, negotiation with that unmotivated seller can be very difficult.

4. ASK WHAT INSPECTIONS THE SELLER HAS COMPLETED. The best listing agents suggest their sellers, before officially listing the home in the local MLS (multiple listing service), have the customary local inspections completed.

There are two primary advantages of pre-listing inspections for sellers: (a) unexpected problems, such as a leaky roof or termite damage, can be repaired by the seller, and (b) costly surprises are avoided for sellers when the buyer's inspections must reveal unexpected serious damage.

Based on the inspections, the seller can then provide a written disclosure report listing any defects of which the seller is aware but the seller has not had repaired.

Depending on local custom and statutes, pre-listing inspections might include pest control (termite), radon, energy efficiency, building-code compliance, and a professional home inspection. It is very impressive for buyers to be shown the customary inspection reports revealing a home without major problems.

Some buyers will accept the seller's reports without hiring their own inspectors. However, the smartest buyers include a contingency clause in their purchase offer making the offer contingent on the their approval of their own inspectors' reports.

After the buyer's purchase offer is accepted by the seller, if the buyer's inspections reveal undisclosed defects, the buyer then can (a) disapprove the reports and obtain a full refund of the good faith deposit, (b) re-open negotiations on price and terms, or (c) ask for repair credits as part of the closing settlement.

5. BEFORE MAKING A PURCHASE OFFER, ASK YOUR BUYER'S AGENT TO PREPARE A COMPARATIVE MARKET ANALYSIS (CMA). The most important reason home buyers need their own buyer's agent is, before a purchase offer is made, the buyer's agent should prepare a CMA.

This CMA form shows (a) recent sales prices of comparable nearby homes, (b) asking prices of similar neighborhood homes currently listed for sale, and (c) even asking prices of recently expired competitive listings (usually overpriced).

Using the pros and cons of each home shown on the CMA, with the agent's help the buyer can then arrive at a fair purchase offer price. The buyer's agent will then show that CMA to the seller when the buyer's purchase offer is presented.

Although the seller's agent probably prepared a CMA for the seller at the time of listing, the local home sales market might have shifted in the several months since then so the buyer's up-to-date CMA is a very important negotiation tool. It shows why the buyer's purchase offer is reasonable and should be accepted (or at least counteroffered) by the seller.

SUMMARY: By following the five negotiation tips above, smart home buyers can take advantage of the current buyer's market in most cities. Although it's a great time to be a home buyer, to avoid overpaying or buying the wrong home, savvy buyers who implement these five buyer tips will be on their way to a wise home purchase.

(For more information on Bob Bruss publications, visit his
Real Estate Center).

For additional information, please contact:

Vito Boscaino
Help-U-Sell North High Realty

northhighrealty@helpusell.com
http://northhighrealty.helpusell.com

No comments: