“This year, go out and buy. You will get the best deal you will ever get in your life,” says Ron Russell, president of Russell Real Estate Services. “Interest rates are low and [existing] home prices are down 10 to 15 percent.”
If you’re a newlywed, first-time homebuyer, renter, investor or seeking a bigger, more expensive home, 2008 is the time to make your move. The foreclosure problems and housing slump has created an overstock of homes in the marketplace in every demographic, from inner-city Cleveland to Solon and Avon.
Once you decide to buy, you need to determine what you want and what you are willing to pay. “In any marketplace the buyer needs to first recognize what their needs are and make them clear to the Realtor they are working with. They should not get caught up in buying a particular home just because it’s a good deal; it should really meet their needs,” explains Dianna L. Hosta-Stickney with RE/MAX Pros.
“With the high inventory of properties, everything is negotiable,” Hosta-Stickney adds. “Many times now I see if the buyer wants it, the sellers are willing to give because they don’t know when the next offer will be coming.”
And it turns out that, when it comes to buying a home, everything is negotiable but the wife and dog.
Prepare to Negotiate
As with any major purchase, research and education are required to obtain the best deal. Once you find the “home of your dreams,” the next step is to gauge what it’s worth.
Many sellers swear by the appraised value of their property. The selling price, however, is more market-driven. If the appraisal is old, for refinancing purposes, the appraised value may be higher than today’s market value.
“A Realtor has the ability to accurately price a home by conducting a comprehensive market analysis on the property. This report provides pricing information on similar homes in the area in order to allow you to understand what comparable homes in the same area are being priced at,” says Barbara A. Reynolds, CEO of Real Living Realty One.
“The best way is to have your Realtor investigate properties of like kind in the immediate area that have sold in the last six months in our Multiple Listing Service, along with checking the county records to let the buyer make an educated decision,” Hosta-Stickney adds.
What to Negotiate
There are certain “red flags” that can reduce the selling price of a home. Almost any type of major home repair could be cause to lower the selling price. These include leaky roofs and basements, faulty mechanical systems, cracked walls, cracked windows — anything that is obvious and a major cost to repair.
Negotiating can involve more than just a repair on a home — it can be aided by the property itself. The best deals can be found on existing homes because the market is flooded with them and many owners are desperate to sell. Some have purchased other properties or are relocating and cannot afford two mortgages. Other homes are the product of short sales. Short sales are homes that are about to be foreclosed upon. These sellers are motivated to sell their properties before they lose them. In a short sale, the seller can make some money and maintain a better credit record than if the home were foreclosed upon and sold at a sheriff’s sale. These homes are usually well-maintained and the incentive is that they need to be sold quickly.
One caveat is to beware of bank repossession, foreclosure and sheriff’s sales. If the price of the property seems too good to be true, it probably is. These sales do not allow a buyer time to have the property inspected — what you see is what you get. Often you cannot see the interior of the home. Unless you are a home-remodeling expert up to the challenge, these sales are “buyer beware.”
Before Making an Offer
Before making an offer, talk to the mortgage officer. Go over the selling price, the property taxes and fixed costs such as insurance. Add in the down payment and closing costs. Determine what the actual cost is to own the home on a monthly basis. Can you still afford it? Are you comfortable with the sum? Remember, buyers shouldn’t put everything they have into a home. No raiding that 401(k)! A buyer should have money in reserve for living expenses and emergencies. You don’t want to be “house rich, cash poor.”
According to Fannie Mae, a government-established program that makes funds available to mortgage lenders, the general guidelines state that a household should spend no more than 28 percent of its income on housing expenses and no more than 36 percent of its income on total debt obligations (including the monthly mortgage payment).
Making the Offer
An offer on a property, once accepted, is a binding sales agreement and includes a deposit. Only make an offer on a property when you are comfortable.
“Many times terms such as timing, contingencies and chattels can have an impact on your offer. A Realtor can provide advice on what puts you in the best position with regard to your offer,” Reynolds says. “A qualified Realtor is also knowledgeable about this ever-changing pricing environment, providing what is a reasonable offer at this moment in time.”
Get the Property Inspected
Have a property inspected prior to purchase as a precaution against unexpected expenses and surprises. Even though Ohio has a property disclosure form, things can still be wrong with the property. It is usually the buyer’s responsibility to cover the cost of a home inspection. Expect to pay about $350, though the fee depends on the property size and complexity of the inspection report. However this, too, may be negotiable.
You want to hire a licensed home inspector who does not have an interest in the sale. Your Realtor can offer some recommendations. Ask to see proof of an inspector’s membership in the American Society of Home Inspectors (ASHI). Members of ASHI have to meet a strict code of ethics.
Review the inspector’s one-to-two page report with your real estate agent. The report will outline all possible problems with the home. Large-scale problems, such as heating, cooling, roofing and plumbing, can cost $2,000 or more to repair. Repairs such as insulation or painting can cost $500 to $2,000. Small problems can cost under $200. Based on the report, consult with your real estate agent to determine if the property is a wise choice.
“With regard to what you should ask to be fixed in negotiations, so much of this depends on what your initial offer is prior to the inspection report. You must always be cautious of losing a sale because the seller feels he is being nickel and dimed. Also, many times, if you ask the seller to make the repairs, you may not be satisfied with how he/she does those repairs. You might be better off to ask for a dollar amount so you do the repairs or supervise some,” Reynolds cautions.
Buyers should also be aware that no property is perfect. Imperfect paint color, lack of upscale brand-name appliances or old utilities in a home is not a defect or cause for a major price drop.
“Buyers can get the best deal by being patient. I still hear from sellers that they have listed higher because they don’t want to ‘give the property away.’ If the seller is motivated and the buyer is patient, and the buyer has set up a good negotiating strategy with [his or her] agent, a good deal can be had,” says Sharp-Gates.