Real Estate: Buying in a Slow Real Estate Market

If you are in the market to buy a house, we are experiencing the biggest purchaser’s market in more than a decade. As prices decline and more properties sit with no buyers, quality buyers have the edge.

In this market, the sellers and mortgage companies are hunting for buyers, and the buyers have strength.

Plenty of Options in a Depressed Real Estate Market

In a slow real estate market, the real estate buyer has many choices. In 2002 to 2004, buyers were racing against each other to invest in homes, often triggering bidding wars on homes for sale within a day of the first open house. Jump ahead to 2008 where many homes stay with no buyers for months - even years where before a buyer is found.

Today, the home purchaser has less competition. He can spend time consider many houses to select the one that is the best fit. With very low interest rates, she can also borrow from the current home, (assuming the real estate has equity) to expand or renovate. Still others are still waiting, to see if the market falls further, if making the real estate move.

Purchasers Hold All The Cards

With many sellers and few purchasers, the purchasers are in the driver’s seat. Real estate sellers are getting fewer offers than ever. Good quality home will generally sell, but at a reduced price. Poor quality houses may not pick a purchaser at all. A good offer - with a reasonable mortgage amount and little mortgage risk where is very attractive to the seller.

How Much Should You Offer?

This is always a hard question to ask. Ideally, you want to bid as little as possible so that you are able to get the home at the best price. However, we do not advocate walking in to a $500,000 home and low-balling $200,000. The seller will likely ask you to leave, not consider any other offers you may present and the seller’s real estate broker will remember you - especially if you try to another of his clients’ listings.

Evaluate the Real Estate to Decide What it is Really Worth

Before making an offer, you should truly sit down with a pad and pen and think about how much this house is actually worth. How does it compare to other houses currently unsold? How does it compare to listings that have sold in the last 9 months? Compare both the type and size of the home as well as the location; a 4 bedroom home on one side of town may be priced differently than a 4 bedroom home on the other side of town. Use a free reference guide, such as HomeBuyersGuide.com to help you assess the area as well as each piece of real estate you visit.

You Must Use a New House Inspector

While you are not required to, it would be foolish to make a residential real estate purchase without using a new house inspector or engineer (unless you are personally qualified). They are not taken by this home; they have no emotional attachment. They can evaluate it objectively and identify all of the problems. They may be able to provide you with information about the rough cost to make essential and non-essential repairs to the home.

Make Sure You Will Be Happy Here for the Next 5 Years

People bought houses speculatively from 2002-2006, leading to the problem in the real estate market today. These purchasers drove up costs, are now struggling with multiple houses and, often, are turning to bankruptcy. You should not expect to be able to get out of this house in the near future. Be sure you really want to be here.

Give them a Clear Offer

There are basically twp types of bids you can make when looking to purchase a new home. Each takes a different strategy; any can work well in the right circumstance.

Low Balling the Seller - here, you bid well below fair market with an offer on the home. These will usually be turned down quickly unless you have a distressed seller. Be careful - if you insult the seller, they may refuse all future negotiations.

Reasonable Offer - here, you have factored in comparable prices, defects and any repairs required, recent prices, how long the home has been unsold and the current market in your area. You need to prepare a clear written offer covering:

Offer amount

Justifications why you are offering less

Expected closing date

The percentage you will be putting down as a deposit

What amount you will be paying towards the price

The percentage you look to pay through a mortgage

Many home sellers could take slightly lower offers from purchasers who are offering all cash or 30% down subject to a 70% mortgage, as opposed to a higher offer where the home buyer wants to put “no money down” and get a mortgage for the entire purchase price. The first will stand a better chance of actually following through and buying.

Conclusion

Sadly, the nation is in a significant down market in the residential real estate industry. However, this creates opportunity for buyers. If you are able to benefit as a buyerin this market, you are in the driver’s seat. You will have your choice of houses and will be able to pick great values.

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