Anywhere I see people, at parties, shopping or out to lunch with friends, I’m constantly barraged with questions about the real estate market. Everybody wants to know where the market is heading, whether it is a good market or a bad market. I know a lot of buyers who think this is the best market ever. And they're right. Prices are coming down and deals are being made, which means sellers are selling. Buyers and sellers need to employ different strategies. No single marketing method is best, so smart sellers employ a number of marketing techniques in hopes that one will attract that motivated buyer. Buyers are getting concessions that were impossible to hope for last year. Interest rates are attractive, too, and new loan programs are being rolled out that favor first-time home buyers. If you're buying in this real estate market, it could definitely pay to consider these market strategies.
1: DISCOVER WHY THE SELLER IS SELLING: 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. 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: Before making a purchase offer, 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. However, if the seller has no specific deadline to sell, negotiation with that unmotivated seller can be very difficult.
4: 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. 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 counter offered) by the seller.
This Week’s Real Estate Insight: Conditions are poised to give buyers more homes at lower prices as motivated sellers are more open to negotiations. Buyers don't quite yet hold all the cards, but with a little strategy, there are great deals to be made.
