In today’s real estate market, Buyers have plenty of inventory to choose from and sellers have lots of competition up and down their streets. Buyers can get good deals, no question about it. But how do you get the BEST deal?
Whether you are a buyer shopping for a home or investment property or you are a buyers’ agent working to get your client a great find, here are some tips that may help you get the best deal.
Step One: Get “Pre-Approved,” not “Pre-Qualified!”
This rule is just as important in a buyers’ market as in a sellers’ market. If you want to get the best property you can for the least amount of money, make sure you are in the strongest negotiating position possible. Price is only one element in the negotiations (and not necessarily the most important one). Often other terms, such as the financial strength of the buyer or possession time, are equally important to a seller.
Step Two: Sell First, Then Buy.
If you need the equity to buy your next home, you will obviously need to sell it before buying your next home.
While the market has changed and more contingency offers are being written today, consider this scenario: You’ve found your ideal house. You make an offer to the seller: You want the seller to accept a low price and wait until you sell your house. The seller knows he risks losing a buyer who does not have to sell a house while he’s waiting for you to get yours sold, so he agrees to remove the house from the market for 30 or 60 days, but at a price that is not quite as low as your offer. You have now paid more for the house than you might have because of the contingency. Furthermore, you need to sell your home quickly or lose your dream home! You are the one feeling a little pressure now; you might take an offer that’s lower than if you had more time.
The bottom line is that buying before selling could cost you thousands of dollars.
Step Three: Keep Your Wish List Short.
Keep your search criteria broad. Avoid too many “must haves” on your list because they will narrow the field of possible homes considerably. Remember, you are not the only buyer looking for acreage away from the city with a pole barn and a babbling brook. The more focused your wish list is, the more likely you are to encounter another buyer who will be bidding against you for your dream home. The more committed you are to your wish list, the more likely you are to find yourself in a bidding war.
Leaving your options open also minimizes your emotional investment in any one home until it is actually yours.
Step Four: Go Shopping and Play Eights & Aces
Ace is low in this game. Eights are high. Create a list of criteria important to you: school district, number of bedrooms and baths, yard or acreage, etc. Remember, keep your wish list short; include only those features essential to you.
Make copies of the list and slide it into a clipboard. Note each address at the top of the list. After you have toured a home but before the next one, make your evaluation. One score for each criterion from low to high — 1 to 8, respectively.
Example: Yard: Nice, give it an 8. Bedrooms: Only 3, not 4. Hmm, we would prefer 4 but can live with 3, give it a 4. Schools: Great schools, excellent sports and music but a little too rural, give it a 6.
After you have looked at all the homes which fit your search criteria, add up the score for each one. The ones with the highest scores may where you want to start making offers.
Remember, while our objective is to get a great deal, it is a home you will be living in for some time. Even if you are only buying an investment property, the criteria you scored high will very likely be scored high by a future buyer.
Step Five: Do Not Nitpick the Offer.
Negotiate the big stuff; do not get bogged down in the minutiae. Keep your offer as simple as possible. A seller will be more likely to accept an offer that is $20,000 or $30,000 under the listing price if the buyer is not also asking for the beer fridge in the basement, the curtains in the bedroom (that match the comforter), and Fido´s dog house.
Give the seller as much of what they want as possible in terms of possession, reserved items (like a refrigerator or sentimental rosebushes) and keep your offer focused on the price.
Step Six: Provide Your Credit Score to the Seller Along with the Offer.
“What???” you say? That´s right. Give the seller more than “information contained in a credit report.” Give them specifics. Specific information is much more powerful than general information.
Wouldn´t you look a lot stronger to a seller with, “My credit score is 740″ than “I’ve got good credit.” Put your strongest foot forward when your credit score is strong.
I cannot tell you how often a (weak) agent or lender has told me disclosing such information is a violation of the Privacy Act and, as a listing agent, I have no right to that information. To them, I suggest they read the law or consult an attorney. I have, and it is my understanding that you (the buyer) has every right to disclose that information and can authorize their agent to disclose it by giving their permission in writing.
When I am working for buyers, the third form I require they sign, after agency disclosure and a buyer agency contract, is the permission form to disclose their credit score to a seller as part of the negotiation process.
Step Seven: Put Your Money Where Your Mouth Is.
Did you ever hear the saying: “Never bring a knife to a gun fight?” The same holds true of earnest deposits. Show you are serious about buying a home by putting up a hefty earnest deposit. If the normal earnest deposit in your market is 2% of the selling price, put up 5%. If the norm is 5%, put up 10%.
If you want to really get the seller to take you seriously, remove the contingency that your offer is subject to financing approval. After all, you know whether you will be approved for a mortgage, don’t you? If you received an acceptable pre-approval from a top-notch lender, and you’ve done nothing to hide information or damage your credit rating since, the chances of a mortgage denial are pretty slim.
You are asking the seller to take the risk of removing the house from the market for 30 days. If you can bolster the seller´s confidence in doing so, the greater chance your offer will be accepted.
Step Eight: Be Nice.
It was once said, “You can get more from a Smith & Wesson and a kind word than just the kind word.”
Consider the dynamics of today buyer´s market to be the Smith & Wesson. YOU must be the kind word. No one likes to have a gun held to their head. Often, a kinder, gentler approach can temper the seller´s frustration and get a low offer accepted when the “take-ir-or-leave-it” approach fails.
Too many buyers and buyer´s agents are bullying sellers today. Be the exception. Call for showings well in advance. Arrive on time, leave a card and turn the lights off when you leave.
Write your offer. Present it to the other agent or seller (per custom in your area) politely. Don´t editorialize. Don´t apologize for the price. Don´t take on the seller´s anger and get defensive. Just present it in the kindest way possible: For example: “I completely understand your seller was hoping for more and I sincerely wish the market were different. The buyer feels this is a fair price for the home in today´s market. I know you´ll do your best. Thanks!”
Buyers and agents who treat sellers respectfully will have a head start when it´s time to negotiate.
