Take advantage of this historic buyer’s market
You should have been a drummer? Why? Because your timing is perfect. This buyer’s market is the best in recent history. Some estimates put home prices at a 20-year low. Whether you’re considering buying a home or an investment property–you have fantastic options.
While it’s true that foreclosures, short sales and highly motivated sellers trying to avoid those things have helped to lower property prices, it’s also true that unprecedented inventories are beginning to take a hit. Lots of people are buying, and the best deals get snatched up quickly. Even in this tricky economy, many of the lowest-priced homes and investment properties stay on the market for just a day or so–most stay on much longer, but bargain hunters who know what they’re looking for pounce when they see the right property at the right price. What should that mean to you as a buyer?
Ducks In A Row
Like the Boy Scouts say, “Be Prepared.” If you’re planning a move and have to sell a home before you can buy, that should be your only priority. If your home for sale has a solid contract, or it’s already sold, or you don’t need to sell, then and only then can you start acting like a buyer.
Cash Is King
While there are more fabulous properties selling for fantastic prices, financing is now harder than ever–but not impossible. With this tight credit comes the need for cash and liquidity. Strong credit scores, 15- to 25-percent down payment, another 10- to 20-percent of the selling price, liquid, in the bank, and a strong employment history, make you a qualified buyer. But don’t lose hope if those criteria are shaky–finance officers are putting deals together for less-than-perfect buyers.
Once you’re pre-approved by your bank, or a mortgage broker, call a Realtor. Sure you can do some of the work on your own, but having a Realtor on your side only makes sense. And it won’t cost you a thing–the seller pays the Realtor’s commissions. Give your Realtor copies of your pre-approval letter, and a current bank statement (with account numbers blacked out) showing your liquidity and availability to write an earnest money or good faith check.
Know the area in which you want to buy. This may take several weeks. If you live out of town, plan at least a three-day visit for this purpose.
For residential buyers, drive through neighborhoods day and night. Look for the things that matter to you. Once you know the general area, enlist a Realtor. You can call the Realtor listed on For Sale signs (this would generally be the Listing Agent), or you can enlist a Realtor for broad searches of an area.
Inaction May Be Your Enemy
Don’t feel pressured to make an offer, but do heed the warnings of a Realtor who suggests writing a contract on a home you love. If after careful evaluation you feel the property is priced right, you’re pre-approved for financing, the property appears clear for sale, and it “feels” right, consider making an offer.
Low-Balling vs. Asking Price
The fine art of negotiation is painted in shades of grey. Some listing information will say, “price firm,” or similar, in the written details. Many bank-owned properties are sold this way, but most everything is negotiable. Sellers know this, and will often include wiggle-room in their selling price.
Buyers who insult sellers with ridiculously low offers, e.g. $100,000 on a $200,000 property, permanently sour some deals. By law your Realtor must present every offer you instruct him or her to make, but be reasonable. Have an idea of your highest reasonable offer, and come in first under that.
For example, if you and your Realtor think $180,000 is as high as you should go on that $200,000 home, then make an offer for $175,000. The seller may make a counter-offer at $190,00, then you counter at $180,000 as your “final offer.” If the seller ignores your “final offer” statement, which is usually the case, and comes back with $185,000, then you have to make a choice. How badly do you want the property? Are you willing to lose the property over $5,000? Remember, your time has a value, and you must start looking again should you be unable to come to an agreement. Consider another counter-offer, meeting in the middle at $182,500. If shows good faith, flexibility, and your seriousness.
The same tactics may be employed when purchasing investment properties. Ultimately it’s up to you–if you love the place, and all other variables check out, then do what your head and heart tell you.
Paul Grimshaw is a freelance journalist and licensed South Carolina Realtor. These are only the opinions of the author, and not legal advice. The comments contained within should not be applied to any specific real estate transaction.