Eight Steps To Finding A Real "Buy"

The U.S. housing market is showing signs of cooling after five years of sizzling growth. That fact is well documented, but what are you going to do about it — that’s the question. According to the National Association of Realtors, a growing gap between sellers’ asking prices and what purchasers are willing to pay is becoming apparent. For prospective home buyers, that’s good news. As the market shifts, a chance to negotiate is back within reach.

Strategies for securing a below-market price vary by location, but Bankrate.com believes that America’s bargain-hunting buyers can close favorable deals by applying eight basic principles.

1. HOUSE HUNT OFF-SEASON
The simplest step, but an effective one nonetheless. The best time to buy a house is the week between Christmas and New Year’s Day. Because no one else is.

“The only ones out there are people who desperately need a home or investors looking for a bargain,” says says Robert Irwin, a real estate author and investor.

Using the same logic, early spring is among the worst times to make a deeply discounted offer on a home. Thanks to pleasant weather, longer daylight hours and heightened interest among buyers, more sellers put their homes on the market then. This seasonal pattern applies to most of the country, with warm climates often serving as exceptions. Arizona and Florida real estate, as well as other locales popular with sun-seekers, are likely to see steady levels of sales activity year-round.

2. ACCEPT SOME IMPERFECTIONS
Droves of would-be buyers pound the pavement looking for spacious, well-maintained homes in upscale neighborhoods. Good luck with that.

To secure a low price, seekers ought to accept a few shortcomings, such as repairs that need to be made or a location on a busier street. A bargain could also be found in a revived neighborhood that is in the process of improving in spite of a checkered past.

On the flip side, don’t be reckless. Home seekers might be tempted by the price of a local “handyman’s special” — the kind of home that can be quite profitable for a do-it-yourself type person or an investor with experience in renovations. But let’s say you’re not handy and don’t know any reliable building contractors. Then pass. At the very least, get a professional estimate for the cost of repairs and upgrades.

3. REMEMBER THAT REJETION IS HEALTHY
Don’t be upset if a seller turns down your initial offer(s). Rejection is a normal, even essential part of the negotiating process.

“Never make an offer you think they will accept,” says Thomas Early, president of the National Association of Exclusive Buyer Agents, who believes rejection is the first rule of savvy house shopping. Rule number two? More rejection. “Make the seller say ‘no’ at least twice. It’s too easy to say no the first time.”

Granted, that strategy doesn’t work as well in places like San Francisco or Boston, where it’s been common in for sellers to get multiple offers above the asking price in recent years. Sight unseen, in some cases. But homes sell for an average of 94 percent of listing price in most areas of the U.S., so you may find this method works well.

4. MAKE MANY OFFERS… ON MORE THAN ONE PLACE
Bargain-hunting buyers should plan to make offers on several homes. An investor who makes lowball offers on 10 properties is more likely to find a willing seller than one who pursues only one or two. It is simply a matter of keeping more options open. At the same time, there is no point in making wildly underpriced offers, or throwing things out there just for the sake of it. Such offers are rarely accepted and just about never appreciated.

5. FIND YOURSELF A GUIDE
We have all seen that great-looking house in a real estate circular or the newspaper. In this case, you might be tempted to call the agent listed by the photo, but that’s often a mistake.

“A lot of buyers think that ‘If I call the listing agent, I’ll get a better deal.’ That’s not true,” said Bob Wilson, an agent with the Guiltinan Group in San Diego County.

Listing agents have a duty to get the best possible price for the seller. Translation: They are not good advisers for people looking to make a lowball offer and knock the price down a few notches. Buyers need someone to represent their interests. A buyer’s agent, who researches listings exclusively for a home seeker, is the way to go. The buyer’s agent normally splits the sales commission with the seller’s Realtor when the purchase closes.

The buyer’s agent is required to help you, and under no obligation to get the highest possible price for the seller. Because buyers don’t have the deep knowledge of neighborhoods, or the comparable homes and current prices in the area, they are well worth hiring to boost your efforts — especially if you are operating on a tighter budget.

6. KEEP AN EYE OUT FOR MOTIVATED SELLERS
The more desperate homeowners are to sell — for whatever reason — the more likely they are to accept discounted offers. Real bargain hunters should, in that case, always be on the lookout for owners anxious to dump their properties.

One tactic is simply to look for listings that have been on the market longer than normal. A well-kept home in a good neighborhood typically sells within a month or two. Sellers with homes on the market longer than that will probably more receptive to lower offers. In this kind of market especially, they may be overvalued to begin with. Another strategy is to use large-scale layoffs, closures or relocations of local businesses to your advantage, as large numbers of affected employees will likely to be selling their homes.

7. INCENTIVIZE
It’s like any business negotiation. The basic premise of this step: If you offer a lower price than sellers expect, or would like, you need to give them a reason to accept your offer.

Offering to close quickly, pay in cash and to attach few contingencies are keys to completing a deal. Such offers are particularly attractive to homeowners under duress — people who don’t have time to spare, and who might even be facing foreclosure, struggling with debt or forced to relocate by their employer.

8. DO NOT FIXATE ON THAT LIST PRICE
In the end, it’s a guideline, not a rule. The true value of a home is what someone pays for it — not necessarily what is reflected in its listed price. A property’s listed price simply reflects what a seller hopes to get, like any asset or product up for sale. Usually this is based, at least in part, on selling prices of similar homes. But it could be off the mark. So much so that people who buy homes well below their list prices still overpay.

“It’s no indication of what you should pay,” says Irwin. “You have to do your own analysis.”

Amen to that. Just as when you are finding the lowest rates on your Florida home loan, take things a step at a time and remember how to maximize your leverage. Play it smart and you will wind up successful… maybe even with a better deal than you ever expected you’d get.