Are you planning to buy a home in an area that happens to have a glut of "For Sale" signs? If so, you may be in luck, says Sid Davis, author of "A Survival Guide for Buying a Home."
"Where unsold houses abound, many sellers are now feeling the heat. It's amazing how you can sometimes slice the price if you get out there and negotiate, negotiate, negotiate," says Davis, a real estate broker for 23 years.
As a first step, he says buyers need a real estate agent with excellent bargaining skills and years of experience.
"You can often get referrals for good agents from title companies. These are firms that close real estate deals. They work with agents every day and know the ones who get the best results for their home-buying clients," he says.
Would-be buyers scouting for a property in an area where sellers are plentiful often can get a better home than they anticipated. But they need a savvy approach, according to Davis.
"In a lot of communities, smart shoppers can actually get more house for the same money than they could a year or two ago," he says.
Here are some tips:
- Investigate recent sales in prospective neighborhoods. Are you unsure if the community where you'd like to live is a genuine buyer's market? You can find out by examining statistics that should be readily available to you through your real estate agent, says Leo Berard, charter president of the National Association of Exclusive Buyer Agents (http://www.naeba.org ).
One set of statistics that can tell you a lot about your potential bargaining power are those that compare listing prices for homes that have sold compared to the actual closing prices. Berard suggests you obtain numbers in the neighborhood where you're searching for sales that have closed within the last 30 to 90 days.
If the figures show most sellers have lately been getting nearly 100 percent or more of their asking prices, the neighborhood is still in high demand. But if most sellers have had to accept just 90 percent or less of their asking prices, the reverse is true, and you can assume there's wiggle room for bargaining.
- Make yourself look sharp as potential buyers. Some would-be purchasers fail to realize that it's still important to obtain mortgage preapproval before they start shopping for a property.
"When houses go begging, people get overconfident. They don't realize they can probably cut a better deal as buyers -- even in slow markets -- with full preapproval from a credible mortgage lender," Davis says.
Full preapproval means your credit standing, income and other financial variables have been verified by the lender's office. The lender then issues you a preapproval letter, which can be attached to any contract offer you make. This often reassures motivated sellers that the deal will go through, Davis says.
- Don't rule out a "problem house." Suppose the average home in the community where you're looking now sells within a 60-day period. But one of the homes you like has been sitting unsold for a period far longer. Does that mean there's something seriously wrong with that property and you should scratch it off your list?
Not necessarily, says Davis, noting that homes can become stigmatized within a matter of weeks simply because they were initially overpriced and their owners dropped the asking price too slowly.
"Sellers who are stubbornly unrealistic about their prices when a house first goes on the market are eventually humbled. They must yield to a deal worse for them than they could have gotten if they hadn't been so greedy in the first place," he says.
A home that's languished unsold for an extended period due to a pricing issue can eventually prove an excellent deal for its purchasers. But to be sure there's no major defect that has been holding back its sale, Davis says make sure your offer for the place is conditional on the results of a thorough home inspection.
- Try to determine the seller's "bottom line." Obviously, some sellers are more motivated than others to bargain.
Some, like couples who are retired and own their property "free and clear," meaning the mortgage is paid off, can take their time. Occasionally, such owners will simply remove their home from the market if it doesn't sell in a reasonable time.
But as time passes, most sellers soon become more motivated. They're selling for a reason -- such as a job transfer, a divorce or a need for a larger home due to a growing family. As Davis says, your real estate agent often can get clues on the intensity of the sellers' motivation through conversation with their listing agent.
Also, your agent often can learn much about the sellers' bottom line through a quick look at documents kept by the local government land-records office. (Most such records are now also easily accessible online.) Any mortgages against the property will be recorded in the land records, allowing a savvy agent to quickly estimate the sum still owed on the home by its present owners.
In instances where there is little debt against the property, sellers may be more willing to make bigger concessions on price in the course of negotiations, Davis says.
"Assuming there's lots of competition among sellers, and the owners of the house have plenty of equity, you can consider getting a bit more aggressive in starting with a fairly low offer," he says.
Highly motivated sellers -- including those who face a lot of carrying costs because their homes are vacant -- won't automatically reject an offer that is well below the market value of the place, according to Davis.
OWNING AND RENTING