Some of you are in a position where you may have decided that it is strategically beneficial to buy a home now, as opposed to waiting for the bottom of the market.No one can say for certain what's going to happen in the housing market. Conventional wisdom says that housing prices may continue to decline for some time. However, that may be irrelevant to you if you've decided, for whatever reason, to purchase a home now. That being said, here are some tips and tricks that may help you to get the best deal possible in today's market.
Buy a short sale
It generally costs a lender around $40,000 to convert a pre-foreclosure to a real estate owned (REO) property. Thus, if you find a short sale on the MLS, and you offer the lender $40,000 less than the appraised value of the home, they'll generally accept it, because the numbers make sense. The downside to buying a short sale are:
- The more expensive the home is, the smaller the discount (in terms of percentages) because the discount is a fixed amount.
- It may take some time (weeks perhaps months) to get a response from the lender(s) once you've made an offer.
Buy a lender-owned property
Real estate owned (REO) properties may sell for 10-15% less than their appraised value (which in some areas my be 5-10% less than some asking prices), and thus offer significant savings over conventional home re-sales. Lenders typically use real estate companies to sell their properties, and thus offer an added benefit over short sales, as they do not exhibit the long wait times for a response to your offer. The disadvantage of a lender-owned property is the condition you may find the home is in. You may find that the appliances, furnace, hot-water heater, or even the A/C unit have been removed; sold by the previous owner before the lender was able to take possession of the home.
End of the quarter
If you've decided to buy a lender-owned property or short sale, try to buy at the end of the quarter (at least 30 days before the end). Why? This is when lenders generally have the greatest incentive to sell a property for less than they would have otherwise; to make their numbers for the quarter look better.
Days on the market
Once a home has been on the market 180 days or longer, the sellers may become anxious, and may be more likely to accept an offer that they would have previously rejected.Thus, if you find a home that has been on the market for 6 months or more, you may be able to pickup that home at a discount. The longer the home has been on the market, the more anxious the sellers may become. So if it's been on the market a year or more, you may be able to purchase it at a steep discount.
Deal directly with the listing agent
Listing agents would much rather deal directly with buyers; as it accelerates the process, cuts down on miscommunication, and the agent would receive both sides of the commission (3% instead of 1.5%). At times, depending on the agent, when price negotiations are breaking down over a small amount (1.5% or less of the sales price), the listing agent may even give up as much as 1.5% to close the deal!
Offer less than the list price
Don't pay the full price!!! Given the continuing decline of home prices, it would be foolish to offer 100% of the purchase price; unless the price is so much lower than the rest of the market that you feel completely confident it's the right thing to do. Generally, one can offer up to 10% less than the asking price and feel reasonably comfortable that the seller will accept it. That's not to say you can't offer less than that, it's just the likelihood of acceptance gets lower as the price does.
Plan to stay put for a while...
If you're purchasing a home now to live in, then you should plan on living in it for at least five years, in the hope that by then you'll be in a positive equity situation. However, if you find that you need to sell it for any reason over the next couple of years, you may lose considerably.
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