Even in Buyer’s Market, Negotiation is Key

Jenn Vest made what she thought was a fair offer on a house in Broward County, but the seller rejected it and wasn’t in the mood to negotiate. The same thing happened on another property.

Vest later found a two-bedroom house in an eclectic neighborhood near downtown Fort Lauderdale. Originally listed at about $550,000, it was reduced to $349,000. She closed on the deal December 29 for $316,000.

“She got the buy of the century,” said her real estate agent, Pamela Orr of Balistreri Realty in Lighthouse Point.

Buyers have been wielding more power since the South Florida housing market came down off its five-year boom last year. Those getting the best deals are hiring experienced agents, pushing for incentives, wearing poker faces, finding motivated sellers and, when all else fails, walking away.

It’s an environment buyers and sellers will have to get used to because many analysts expect the region’s housing slump to linger throughout 2007.

During the housing boom from 2000-2005, competition for homes was fierce as buyers swept in with full-price offers, giving sellers plenty of choices and lots of leverage to force fast sales.

Now, though, buyers are in control as investors have pulled out of South Florida real estate, creating less of a demand for properties. With fewer buyers, homes stay on the market longer.

The supply of homes for sale has swelled in Broward and Palm Beach County, creating havoc for people who need to sell quickly.

While good agents are invaluable, price-sensitive buyers should be prepared to do some of the legwork themselves. That includes driving through areas and scanning tax collector websites for recent prices of comparable sales.

They even can peruse multiple listing service data that used to be strictly available to agents. The mulitple listing service data also includes histories of the properties, and they can show buyers just how motivated or desperate sellers are.

Orr, for instance, noticed that the home Vest bought had been on the market for more than a year. The length of time was the first clue that the seller might be getting antsy.

After probing further, Orr found that prices in the neighborhood were falling, in part because developers were buying homes on the cheap and tearing them down to build luxury condos and townhouses.

Armed with that background information, Vest offered the seller $316,000, about 10 percent less than the latest listing price - and a much smaller Florida mortgage payment for her to make each month.

“We told the seller, ‘This is our best offer,’” Orr said.

The seller had a comparable offer from a developer who wanted to tear down the property but chose Vest’s bid because she planned to live in the home.

In today’s climate, buyers who intend to live in the homes typically can pay 10-15 percent below fair market value. Investors paying cash, able to close quickly and taking the property “as is” might be able to swing deals with desperate sellers for 65-70 percent below market value.

Some agents say prospective buyers shouldn’t worry about making an offer that’s too low, reasoning that sellers can’t afford to be insulted in a market glutted with properties.

Douglas Rill of Century 21 America’s Choice in West Palm Beach just had a client list a Lantana condominium for $400,000. A prospective buyer first offered $330,000 and then $365,000, but the seller refused. After later agreeing to accept the deal, Rill’s client lost out when the buyer had bought another unit in the same complex for less money.

“Sellers can’t be choosy,” Rill said.

But Bruce Gaines of Lang Realty in Boca Raton said buyers shouldn’t make ridiculous offers, either.

“A lowball offer usually sets the tone for the deal. It becomes emotional for the seller,” Gaines said.

Dweck advises buyers never to show emotion, no matter how badly they may want a property, because the seller will use that as an advantage.

But buyers shouldn’t be shy about asking sellers to pay closing costs or to pay maintenance or the homeowner association fees for a year.

New-home buyers should insist that builders match the incentives offered by competitors, and not agree to use the builder’s preferred lender to finance their Florida mortgage loans, which often entails higher rates.

If the seller balks at the price or terms and the real estate agents can’t bridge the gulf, then it’s time to hunt for another property. Simple as that.