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

According to statistics from Realtor, home builder andgovernment sources, the volume of new and resale home transactions is down butthe actual sales prices of individual residences hasn’t changed much in recentmonths.

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

Purchase Bob Bruss reports online.

During this slowest home sales season of the year betweenThanksgiving Day and New Year’s Day, extending to Super Bowl Sunday in manycommunities, motivated home sellers and builders are especially anxious tosell.

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

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

Typical answers will be 90 to 120 days. However, it is notunusual for a correctly priced home in good condition to sell within a week ortwo.

The supply inventory of unsold homes is higher than buyerdemand. The result is “the buyer is king.”

To successfully negotiate a home purchase in the currentbuyer’s market in most cities, here are the five top negotiation tips fortoday’s home buyers:

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

In other words, negotiate with sellers who really want tosell. 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 tokeep the buyer and seller from meeting each other, whenever possible it is tothe buyer’s advantage to meet the seller before making a purchase offer.

A good question for a buyer to ask the seller (and/or theneighbors) is, “What do you like best and least about this home?”Then keep quiet and let the other party talk. Listen carefully to discover ifthat 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 andagent’s time to negotiate with that seller unless the asking price is veryreasonable.

However, just to be sure, if you want to buy a particularhouse, 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 sellermakes 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. Butbefore making a purchase offer, savvy buyers ask how much the seller paid forthe home and when it was purchased. If it was bought last year at the top ofthe market, there is probably zero room for negotiation unless the seller has avery 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 publicrecords, and the seller refuses to tell you their purchase price, anexperienced real estate agent can usually make a reasonably accurate estimatebased on the purchase date. For this reason, it is important for home buyers toalways work with a buyer’s agent who knows the community.

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

In addition, buyers should inquire of their buyer’s agentwhen the listing expires. If the listing expires in the next few weeks, thelisting agent will usually be extremely cooperative and motivated to get thehome 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 bestlisting agents suggest their sellers, before officially listing the home in thelocal MLS (multiple listing service), have the customary local inspectionscompleted.

There are two primary advantages of pre-listing inspectionsfor 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 sellerswhen the buyer’s inspections must reveal unexpected serious damage.

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

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

Some buyers will accept the seller’s reports without hiringtheir own inspectors. However, the smartest buyers include a contingency clausein their purchase offer making the offer contingent on the their approval oftheir 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 partof the closing settlement.

5. BEFORE MAKING A PURCHASE OFFER, ASK YOUR BUYER’S AGENT TOPREPARE A COMPARATIVE MARKET ANALYSIS (CMA). The most important reasonhome 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 comparablenearby homes, (b) asking prices of similar neighborhood homes currently listedfor 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, withthe agent’s help the buyer can then arrive at a fair purchase offer price. Thebuyer’s agent will then show that CMA to the seller when the buyer’s purchaseoffer is presented.

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

SUMMARY: By following the five negotiation tips above, smarthome 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 buyingthe wrong home, savvy buyers who implement these five buyer tips will be ontheir way to a wise home purchase.

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

Copyright 2006 Inman News

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