We are experiencing what many media and industry circles term a buyer’s market. It is the first lesson from Marketing 101; prices will increase, e when demand is high and supply is low, but when demand is low and collection is high, prices decrease. To increase your price, you need to increase demand or reduce supply. Today’s challenge revolves around the high number of people forced to sell for various reasons and the perceived fall-out from loose lending practices.
As a potential buyer in this market, you are afforded several advantages over the typically unavailable seller. Before we go any further, I want to address a common misconception the buying public learns from mass-media outlets and certain market gurus… A buyer’s market does not mean you will receive any concession from a seller regarding price; you may still end up paying top retail prices for your next home. Lovely homes in great locations will always command top prices, and if you think otherwise, you may be quickly outbid by another, the more aggressive buyer. We’ll return to price in a moment.
In this buyer’s market, there are other significant ways to save money and increase your purchasing power, which is the article’s focus. First, let’s look at some options from a seller’s perspective. The seller’s goal is to make the maximum amount of money in the shortest time with the minor investment into the property they intend to sell. To make any investment in the property, the seller will need access to capital resources to fund the updates or repairs. A seller can avoid spending the cash or tapping a credit line for this venture and offer the buyer credit on price or in the form of a decorating allowance if they choose.
However, the seller will not make the repairs or updates and leave it up to the buyer to either accept the home as-is or ask for some concessions in the purchase contract. My first tip for you in this buyer’s market is to ask the seller to give you a credit rating allowance or make the necessary repairs before closing. You may think I just wasted your time and gave you useless advice, but you would be amazed how many buyers are too timid or afraid to be aggressive with these concessions. If you do not ask, you will never receive. The worst that can happen is the sellers will say no.
Another way to save money in a buyer’s market is to include a provision in the purchase contract that requires the seller to pay all or part of the buyer’s closing costs and prepaid. This can have a tremendous impact on your buying power because these costs associated with buying a home are what make the first few years of homeownership unprofitable. If you save this money, you will more quickly realize the benefits of appreciation and the reduction in your debt obligation to the lender. Coordinating with your lender, real estate agent, and financial adviser is essential to determine precisely what to ask for so you receive maximum benefit. It is also critical that the contract be written precisely correctly to ensure the seller cannot avoid paying certain costs on a technicality.
Let’s revisit the price and why the buyer’s market hype will not affect an educated seller. Most sellers who have elected to list their homes with an agent will access detailed market data. It will be apparent to even the most novice seller what the market indicates their home is worth. If the sellers take the time and effort to prep their home to sell correctly and heed the market data, they will most likely settle in on a price that a competent buyer will pay. This means you will probably not be receiving any break in pricing from this type of seller.
But you are a savvy buyer, fully informed on the market, and fearless in your negotiations. You will realize that the asking price is fair for the market and attempt to save money in the other ways mentioned above. Sellers are funny… They will settle in on a price but turn right around and give concessions worth thousands of dollars when confronted with a robust and motivated buyer and a signed purchase contract.
While I have remained general in my suggestions, you can easily tailor these ideas to your specific situation and confidently save money, ask for and receive repairs or updates, and increase the value of your purchase. Never forget that quality and location bring a specific value to the sellers, so don’t make the mistake of low-balling your dream home and then losing it because you offended the sellers. Be fair with the price, but get your concessions and savings in other, more creative ways. This is how I believe you can best take advantage of this buyer’s market.