This new, more balanced, housing market calls for a new set of operating instructions for home buyers. No longer do you bid over the asking price just to have a house. The days of overlooking severe defects just so you can get your offer accepted are gone. To be successful in today’s market, home buyers need to be prepared, plan carefully, embrace negotiation and exercise patience.
Foremost in most buyers’ minds is a desire to pay a fair price and not a penny more. This is a legitimate concern and makes it essential that you do your homework before you buy. To keep from overpaying, you need to research the local market carefully.
Find out how quickly listings are selling. Are they selling over the asking price, or are prices being discounted? This will vary from one area to the next and even from one price range to the next.
Ask your agent to prepare a market analysis on a property you’re interested in buying before you decide what to offer. Concentrate on the most recent sales, which will most closely reflect current market value.
In order to avoid overpaying, you also need to stay within your financial comfort zone. Getting pre-approved with a mortgage broker or lender to find out how much you can afford is an obvious first move.
However, with cheap money disappearing, it’s prudent to carefully analyze your financial situation now, and your reasonable expectations for the future before you commit to a specific type of mortgage. Interest rates might not come down again any time soon, so make sure that you’re comfortable with the size and kind of mortgage you use to make the purchase.
HOUSE HUNTING TIP: The rapid pace of home-price appreciation is taking a pause. This means that you can’t overpay and hope that a couple of month’s worth of appreciation will make up the difference. You also can’t count on appreciation to generate the cash to pay for curing deferred maintenance.
For this reason, it’s imperative that you don’t waive inspections. Last year, buyers often made offers without an inspection contingency in order to gain favor with the seller in a multiple-offer competition. Many of those buyers now have a sorry tale to tell. It’s not worth taking the risk. Make sure that your contract includes an inspection contingency, even if you find yourself in competition.
Although multiple offers are scant to nonexistent in some markets, they still play a part of the housing scene in areas like San Francisco and Los Angeles.
Don’t let the threat of multiple offers scare you off. Unlike like last year, today’s multiple offers don’t always send the price higher. If you like a house enough, give it a shot. Just stick to your price limit, and if it doesn’t work, move on.
If you’re the only buyer making an offer, don’t be surprised if the seller doesn’t accept your offer. This is where patience comes into play. Many sellers have not yet adjusted mentally to the realities of the 2006 home-sale market.
Standing firm on your price can be a viable negotiating strategy. Don’t walk away from a negotiation just because the seller gives you a counteroffer for a higher price. If you’re serious about the house, counter back–even if it’s at the same price you initially offered. If this is your best and final price, let the seller know.
THE CLOSING: In some cases, it may take the seller a while to come around. If there isn’t another home you like as much, and if the seller is motivated, time may work in your favor.
Dian Hymer is author of “House Hunting, The Take-Along Workbook for Home Buyers,” and “Starting Out, The Complete Home Buyer’s Guide,” Chronicle Books.