Everybody wants a bargain. Last year, good real estate deals were few and far between. This was due to the fact that inventories of homes for sale were at record low levels. And, there was an abundance of buyers, all looking for the same thing.
Today in most areas, buyers have the luxury of choice. So, there’s less of a chance you’ll overpay because you have to outbid another buyer. However, even though there is a lot to choose from, this doesn’t mean that it will be easier to buy a property at a bargain price.
One reason is that most sellers aren’t desperate to sell. Just because the market has changed doesn’t mean that sellers are slashing their prices dramatically. Many listings that have price reductions were overpriced to begin with.
Another factor is that there is usually little consistency in pricing. Some listings are well-priced, others are overpriced, and then there is the occasional listing that is actually priced below market value.
Another complicating factor is variability. Unless you’re looking at listings in a single tract development, where each house is a cookie cutter of the others, you’ll find disparities in age, condition, size and amenities. Each of these variables has an affect on market value.
HOUSE HUNTING TIP: In order to find a good deal, you need to be able to identify a fairly priced property when you see it. This requires intimate knowledge of home values in the area.
A good real estate agent can help you to develop this product knowledge. But, there is no substitute for doing your own due diligence–driving the area, researching the local economy, viewing listings online and visiting open houses. This gives you the confidence you need to make an educated decision about what constitutes a good deal.
Even though the pace of the home sale market has slowed, you may have to make a snap decision or risk losing out on a great buy. Many home sellers price their homes too high for the market. They usually sit for a while before the sellers realize the house can’t sell without reducing their price.
But sellers who understand the market and have a pressing need to speed the process along will price their properties at or under market value. If you aren’t up on current market values, you could let a good deal slip by because you didn’t act quickly enough.
Part of buying at the right price is being there when the well-priced listings come on the market. Don’t wait until a Sunday open house to see a new listing if your agent thinks it will sell quickly.
It’s possible to create a good deal. One way is to research the listings that have been on the market a while without any offers.
Find out why they haven’t sold. If there isn’t anything wrong except the price, ask the listing agent why the seller is selling and whether there’s any flexibility in the price. Sellers who have a real reason for selling, like a divorce, death in the family or job transfer, will soften on price in time.
Be sure to find out the amount of the outstanding loans secured against the property. If the sellers are mortgaged to the hilt, you might want to move on and negotiate with a seller who has a strong equity position in the property. Even if he sells for less than he’d hoped, he’ll at least sell for a profit.
THE CLOSING: Steer clear of listings that aren’t selling because they have an incurable defect, like a location on a busy street. You may be able to negotiate a bargain price, but you’ll also have to discount your price when you resell the property.
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.