During the slow home sales holiday season between Thanksgivingand New Year’s Day, even extending through Super Bowl Sunday in manycommunities, few people think of buying a house or condominium. However, if youwant to purchase a home and can drag yourself away from holiday festivities,this is the absolute best time of the entire year to be a home buyer.
Why is that, you ask? The answer has two parts: (a) onlyserious motivated sellers have their houses and condominiums listed for saleduring this slowest season of the year for home sales, and (b) competition fromother prospective home buyers is at its lowest now so your purchase offer willbe extremely welcome and seriously considered by a motivated home seller.
Purchase Bob Bruss reports online.
There is an additional reason 2006 year-end is an especiallygood time to be a home buyer. That reason is it is a “buyer’s market”in most cities, meaning there are more homes listed for sale today than thereare qualified buyers in the market so sellers (and their listing agents) areextremely anxious.
It’s a great time to be a home buyer. But not such a goodtime to be a home seller.
BEFORE SHOPPING FOR A HOME, SHOP FOR A MORTGAGE. However,before rushing out to buy a house or condo, smart home buyers first getapproved in writing for a home mortgage. This is a slow time of year formortgage lenders so they welcome your loan application.
Although mortgage brokers can arrange mortgagepre-approvals, the letter or certificate must come from an actual lender, suchas a bank or mortgage banker. Most home mortgage pre-approvals are valid for 60to 90 days.
Don’t even consider a mortgage”pre-qualification,” which means only, “We looked at your loanapplication and you appear to qualify but we haven’t actually verified yourcredit and income.” In other words, a mortgage pre-qualification isworthless.
However, home buyers should understand a lender’s mortgagepre-approval is subject to (a) the lender’s appraisal of the home you decide tobuy, and (b) reverification of your credit and income (don’t apply foradditional credit or go out and buy a new car before you complete your homepurchase).
WORK WITH AN EXPERIENCED BUYER’S AGENT. After obtaining awritten mortgage pre-approval from a lender, the next step to buying a homeduring this best time of the year to purchase is to work with an experiencedbuyer’s agent who understands the market in the vicinity where you want to buy.
Ask friends, relatives and business associates forrecommendations of buyer’s agents. Although any licensed agent can be yourbuyer’s agent, many agents prefer to list homes for sale rather than workingwith home buyers who are often “time wasters.”
A buyer’s agent costs nothing extra. The reason is thelisting agent of the house or condo you purchase will split the salescommission with your buyer’s agent. Only in the rare event you buy a “forsale by owner” (FSBO) home and the seller refuses to compensate yourbuyer’s agent would you owe any sales commission.
EXPECT YOUR BUYER’S AGENT TO PREPARE A “CMA”BEFORE MAKING YOUR PURCHASE OFFER. When you find “the house” or”the condo” you want to buy, before making a purchase offer ask yourbuyer’s agent to prepare a written CMA (comparative market analysis). This CMAis the same form the listing agent prepared for the seller when the house orcondo was listed for sale.
However, your CMA will be up to date, whereas the seller’sCMA might be several months old. The CMA shows (a) recent sales prices ofcomparable nearby residences within the last few months (never older than sixmonths); (b) current asking prices of similar neighborhood homes now on themarket for sale; and (c) asking prices of recently expired comparable listings(usually overpriced).
As a savvy home buyer, you probably will have inspected manyof the homes on your CMA. With the help of your buyer’s agent, you can use theCMA information to arrive at a fair purchase-price offer.
Many buyer’s agents recommend making a purchase offer basedon a per-square-foot basis. For example, if nearby homes of comparable qualityconstruction recently sold for $150 per square foot, you might want to makeyour purchase offer based on $150 per square foot.
Be sure to attach a reasonable good faith deposit check toyour purchase offer. If you are making an especially low offer far under theseller’s asking price, a substantial deposit accompanying your offer will oftenconvince the seller you are a serious buyer.
You can be sure your buyer’s agent will use the CMA preparedfor your use to show to the home seller and the listing agent to justify yourpurchase offer as being reasonable.
However, if the seller doesn’t accept your purchase offer, aluxury of buying during this slow season is there are few other home buyers inthe market. The result is you usually need not be in a rush to respond to acounteroffer or make a new purchase offer.
Waiting a few days to respond, presuming you still want tobuy the residence, will often make the seller think, “That was a prettygood offer. Maybe I should have accepted it.”
KEEP YOUR PURCHASE OFFER SIMPLE. As experienced buyer’sagents will tell you, it’s best to keep your purchase offer as simple aspossible. “A confused mind usually says no” is a very true motto. Forthis reason, it is best to include only a few contingency clauses in yourpurchase offer. Typical contingencies are:
1. LENDER’S APPRAISAL CONTINGENCY. Presuming you need amortgage to finance your purchase, be sure to include a mortgage lender’sappraisal contingency clause in the purchase offer. If the home doesn’tappraise for at least the amount of your purchase offer that was accepted bythe seller, then you don’t have to complete the purchase and can get your goodfaith deposit fully refunded.
2. PROFESSIONAL HOME INSPECTION CONTINGENCY. Smart buyersmake their home-purchase offers contingent on their approval of a professionalhome inspector’s report to be obtained by the buyer after the seller acceptsthe purchase offer.
The cost is usually around $300. Buyers should alwaysaccompany their inspector for the two- to three-hour inspection because it is agood way to become familiar with the home and to discuss any unexpectedmaterial defects that are discovered.
A good source of experienced professional home inspectors isto hire a member of the American Society of Home Inspectors (ASHI). To findlocal ASHI inspectors, go to www.ashi.org orphone 1-800-743-2744.
If the professional inspection report reveals seriousundisclosed home defects, as the buyer you can (a) cancel the purchase andobtain refund of your good faith deposit, (b) reopen negotiations with the sellerto obtain a repair credit, or (c) if the seller refuses to renegotiate, goahead with the purchase anyway (presuming you badly want the home).
3. SALE OF YOUR CURRENT HOME CONTINGENCY. During the lastfew years of a home “seller’s market” in most cities, thiscontingency fell out of favor with home sellers and real estate agents. Butduring a buyer’s market where any purchase offer is very welcome, many homesellers will accept a purchase offer that is contingent on the buyer’s sale oftheir current home.
However, to be fair to the seller, most sellers will insiston keeping their homes listed on the market for sale while the buyer tries tosell his/her current home. In addition, most realty agents suggest a 48-hour or72-hour contingency-release clause. That means if another buyer produces anoffer acceptable to the seller, the first buyer then has 48 or 72 hours toremove his/her contingency clause for sale of their current residence.
SUMMARY: The season between Thanksgiving and New Year’s Day,even extending to Super Bowl Sunday in many communities, is the slowest time ofthe year for home sales so it is an especially good time to be a home buyer.
(For more information on Bob Bruss publications, visit his
Real Estate Center).
Copyright 2006 Inman News
Distributed by Inman News