So much has changed over the past few years that it?s almost hard to remember what life was like pre-2008. Back then, the real estate market was still hot, prices were on the rise and sellers held a distinct advantage at the negotiating table. When the housing bubble burst, a flood of homes hit the market, and the advantage shifted to buyers. While the current, Central Indiana real estate market continues to favor buyers, negotiating a fair price isn?t always easy.
A big part of the problem is psychological. You see, too many buyers and sellers have polar opposite ideas about what constitutes fair offer. On the one hand are semi-deluded sellers who feel their home is special, and somehow exempt from local market conditions. They?ve invested a lot in their home both personally and financially, and cling to a past that doesn?t mesh with the present. On the other hand are buyers who automatically assume all sellers are desperate and on the brink of foreclosure. They make low-ball offers and think they are doing the sellers a favor. In reality, the truth lies somewhere in between.
Here are Five Pearls of Wisdom for New Home Buyers
Be fair. This might sound like common sense, but it?s true. People don?t want to do business with people they don?t like. If your initial offer is too low, you run the risk of insulting the sellers even if that is not your intention. You may inadvertently polarize them against you, making them much less willing to negotiate with you. If you?re shopping on the north side, for example, and the data suggests that two-story Carmel homes in this neighborhood are going for around $289,000, don?t come in with an offer of $225,000. You?ll only turn the sellers off. On the other hand, no one can rightfully fault you for making a fair offer.
Know the market. How can you know the difference between a fair offer and wishful thinking? As the saying goes, ?a thing is worth what someone is willing to pay for it.? And what better way to find out what people are willing to pay than by looking at what they have already paid? You could try to find comparable sales on your own, using your MLS or favorite real estate site; but it?s much better to let a professional do the work for you. A good agent can not only find the best comparable sales, but he or she knows what factors to look for, such as square footage, age, date of sale, distance from subject property, date of construction, size, style, etc.?there?s actually a lot that goes into it. This is especially relevant if you are getting a mortgage loan, since lenders will base your loan off the final appraised value of the home. Hence, the importance of knowing the market.
Know the seller. Unless you?re buying from a friend or family member, you probably don?t know the first thing about the seller(s). But knowing more about the sellers? motivation can work to your advantage. For example, is there big mortgage loan against the property? Or do the sellers have a lot of equity in the home, or maybe even own it free and clear? Ask your agent to find out whether there?s a loan against the property. If there is a loan, then the sellers? willingness to negotiate is limited by their ability to negotiate. If they aren?t upside down, meaning that they don?t owe more on the home that what it?s worth, then chances are they?ll need to sell it for at least what they owe just to pay off their loan. But if they have a lot of equity, then they may be more willing to negotiate, especially if there is some time-sensitivity involved. Maybe accepting a new job has forced the seller to relocate. Maybe there?s been a divorce and the court has ordered a settlement by a certain date. Or perhaps it?s part of an estate sale, and the heirs just want to be done with it. There?s a big difference between negotiating with a seller who NEEDS a certain price and one who WANTS a certain price. Knowing a seller?s motivation can give you a powerful advantage.
Be careful what you ask for. It?s OK to ask the sellers for some things, but not others. For example, don?t ask the sellers to fix anything that would normally be handled by a skilled tradesman or professional. Things like painting and doing woodwork are best left to professionals if you care about the quality of workmanship. Left to the sellers, they?ll either do the work themselves or else hire the cheapest contractor they can find. On the other hand, it?s OK to ask for such things as new kitchen appliances, or a new washer and dryer. It?s also OK to ask for a concession for closing costs, especially in a tight market. Would you rather pay $5,000 in closing costs upfront, or invest $5,000 in your own home in the form of a down payment? This is only an example, of course. How much you put down depends largely on the type of financing you?re using. But you get the idea. In general, try to not get carried away by asking for too much. How much is too much is a matter of judgment. When in doubt, ask your agent.
Don?t sweat the small stuff. If you?re buying a home, then chances are you?ll be living there for at least 5 years. With this in mind, don?t let some small difference between you and the seller make or break the deal. If you?re in agreement on everything but some small thing, like a $1,500 dollar difference, then look at the big picture. You?ve found a home you want and you?re *this* close on price. Are you going to let such a small difference cost you the chance to acquire a long-term residence? You can still come out on top even when are willing to concede some small thing, so long as the deal makes sense overall. If the location is right, and the house is right, then small differences can and should be overcome.
Source: http://www.mswoods.com/blog/2013/02/06/five-pearls-of-wisdom-for-new-home-buyers/
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