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Deal of the Day by AnnaMaria Andriotis (Author Archive)
5 Ways to Negotiate a Better Deal on a Home
In a sharp reversal of the housing boom of just a few years ago homes are lingering on the market for months with few — if any — offers, forcing homeowners to sell for well below the hoped-for amount, says Robert Irwin, author of "Buy Your First Home."
Since December 2006, single-family home values nationwide have fallen almost 12%, according to Beth Ann Bovino, a senior economist at Standard & Poor's. In some parts of the country, home values are down by as much as 17% to 23% from a year ago, according to the S&P/Case-Shiller Home Price Indices.
While the situation seems dire for sellers, it's anything but for home buyers (at least for those who qualify for a mortgage in today's tight lending environment). Even if a home is in mint condition and reasonably priced, buyers can easily shave 5% off the asking price, explains Irwin. And in the hardest-hit places they can low-ball their bid even further. "People are coming in 25% or 35% below the asking price," he says. "The seller may laugh or [they] may counteroffer and begin negotiations."
Below are five ways buyers can best leverage their negotiating power in today's real estate market:
Assess the Seller's Situation
Ask the seller if there's an outstanding mortgage on the property. If, say, the outstanding amount is $300,000, the seller probably won't consider an offer below that amount, says Robert Shemin, author of "Successful Real Estate Investing: How to Avoid the 75 Most Costly Mistakes Every Investor Makes." Also, find out how quickly the owner needs to sell the home. If the owner is in a hurry to move, he or she is more likely to accept a lower offer than an owner who isn't in a rush to sell.Research Comparable Homes
"The key to all real estate purchases is to know thy market," says Mark Goldman, a San Diego-based mortgage broker and a lecturer of real estate investments at San Diego University. The real estate market is so localized, he says, that prices among similar homes vary greatly — not just between cities but between towns. That's why it's important to research the selling prices of homes that are similar both in terms of space (i.e., bedrooms, garages and square footage) and location. Other factors, such as when the home was built and the school district, also impact a home's price, he says.To get a sense of the amounts comparable homes in a neighborhood sell for, go to web sites like Zillow.com, which lists estimated selling prices of more than 80 million properties. Type in a location (it can be an address, street, town or city) to find prices of recently sold homes. Or pull up a home's selling price on the county assessor web site. (Most counties have this site.) Knowing this information will help buyers determine what's a deal and what's not, says Goldman.
Also look around the neighborhood for "For Sale" signs. If many similar homes in the neighborhood are up for sale, then prices should be even more competitive, says Danielle Babb, a real estate analyst and professor of economics and statistics at Northcentral University in Arizona. A large inventory of unsold homes gives buyers the leverage to make an offer that's 15% to 18% below the asking price, she says.
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Order ReprintsLearning the market you're buying in and the 'comps' for the area along with a keen eye on the number of foreclosers in the area is one of the best ways to get the best price. Have a set amount that you want to finance including any renovations and upgrades and subtract that from the list price. If you can't get in at 'your' price, be patient, they will be many more opportunities over the next several months.
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