Wednesday, May 28, 2008

More On How To Make A Good Buy.

Last week we responded to a question of how to make a good buy in this market by addressing some of the terminology and circumstances that have been confusing Buyers, We Hear So Much About Being Able To Make A Good Buy Now … How Do We Get One? We thought it important to continue the good-buy process with some tactics and mechanics that will help you get the best buy you can on a given property.

One mistake we see is the purchase offer being made dramatically below the asking price … with no consideration as to the asking price and its relationship to market value. It is as if the list price is a target from which to reduce simply because it is the asking price. We understand that the typical perception of a good buy is how much the price paid is reduced from the asking price, but it is important to understand that in real estate that there is no “Manufacturer’s Suggested Retail Price”. In fact, home prices are rather arbitrary. They are set after consideration of many market, property-specific, and personal factors. Even professional appraisers give an “opinion” of value knowing that it is not exact. It is close, all things considered, but not exact. Real estate agents and Sellers take the market sales information and sprinkle in emotion and motivation to set a price to achieve a desired result. It can be low if the Seller must get moving, or high if they want to troll for awhile.

We recently saw a 33% disparity in price between a new listing and a similar home two blocks away that has not sold. If you offered 30% below the asking on the new listing you would still be paying over market. On the other hand, if you offered 3% below the asking on the other home you might make a good buy of a wonderful home. Don’t make an offer 15% off of the asking price without knowing the accuracy of the list price. A little research will help you in your buying efforts. It is important to determine a Seller’s motivation – why are they selling? A good understanding of why the Sellers are selling will most likely give you a better chance of making a good buy than simply making a low offer, what we call a “limbo offer” … how low will they go?

Sellers’ motivations vary, but it is what drives them in their selling decisions. Are they moving because of Family? Health? Work? The house/property is too big? Too small? They want to travel while they can before they can’t? An issue in the neighborhood? They want to relocate to another area? They have an investment opportunity and need capital? They need debt relief? Have commitments to honor? Knowing as much as you can about their motivation, the force that guides their decision making, will help you determine what and how to offer to get the best deal on the house you want. What they paid for it is usually less relevant than their true motivation to sell.

Our Advice: It takes a willing Buyer and a willing Seller to make a market value sale. If a Seller is unwilling to go with your low price you might sweeten the offer with other terms adapted to their motivation, i.e.- ultra-short escrow period, time to move after the escrow closes, take it “as-is” subject to inspections to minimize the Seller’s stress and worry, offer a non-refundable deposit after inspections and release it to the Seller to give them some cash, etc. Think of their needs and you might find an approach to the offer that is more important to the Seller than money that will give you a financial gain and make them a willing Seller.

Think of the Seller when preparing your offer – you will make a better deal and have a smoother transaction. It isn’t all about money – you can/will realize a return on your investment in many ways. A good deal is only a good deal if it is a good deal for everybody.
Experience is Priceless! Lisa Wetzel & Jim Valentine, RE/MAX Realty Affiliates, , 775-781-5472.

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