7) Home Buyers: How to Save Thousands of Dollars When You Buy

Home Buyers: How to Save Thousands of Dollars When You Buy

If you're like most home buyers, you have two primary considerations in mind when you start looking for a home. First, you want to find a home that perfectly meets your needs and desires, and second, you want to purchase this home for the lowest possible price. When you analyze those successful homebuyers who have been able to purchase the home they want for thousands of dollars below a seller's asking price, some common denominators emerge. Although your agent's negotiating skills are important, three additional key factors must come into play long before you ever submit an offer.

These Steps Will Help You Save Thousands When You Buy a Home

Make sure you know what you want… As simple as this sounds, many home buyers don't have a firm idea in their heads before they go out searching for a home. In fact, when you shop for a place to live, two homes are competing for your attention: the one that meets your needs and the one that fulfills your desires. Your goal is to find one home that does both. But in the real world, this situation doesn't always occur.

When looking at homes, you'll find that you fall in love with one or another home for entirely different reasons. Is it better to buy the 4- 4-bedroom home with room for your family to grow or the big eat-in kitchen that romances you with thoughts of big weekend family brunches? What's more important: a big backyard or proximity to your child's school?

Far too often, people buy a home for the wrong reasons and then regret their decision when the home doesn't meet their needs. Don't shop with stars in your eyes: satisfy your needs first. If you're lucky, you'll find a home that does this and also fulfills your desires. The important thing is to understand the difference before you get caught up in the excitement of looking.

Find out if your agent offers a "Buyer Profile System" or "House-hunting Service," which takes the guesswork out of finding the right home that matches your needs. This type of program will cross-match your criteria with ALL available homes on the market and supply you with information on an ongoing basis. A program like this helps homeowners take off their rose-colored glasses and affordably, move into the home of their dreams.

To help you develop your home buying strategy, use this form: What do I NEED in my next home:

1. _______________________________________________________________________ 2. _______________________________________________________________________ 3. _______________________________________________________________________ 4. _______________________________________________________________________ 5. _______________________________________________________________________

What would I LOVE in my next home:

1. _______________________________________________________________________ 2. _______________________________________________________________________ 3. _______________________________________________________________________ 4. _______________________________________________________________________ 5. _______________________________________________________________________

How Sellers Set Their Asking Price

To understand how much to offer for a home you're interested in, it's important to know how sellers price their homes. Here are four common strategies you'll start to recognize when you begin to view homes:

1. Overpriced: Every seller wants to realize the most money they can for their home, and real estate agents know this. If more than one agent is competing for their listing, an easy way to win the battle is to overinflate the value of their home. This is done far too often, with many homes that are priced 10-20% over their true market value. This is not in their best interest because, in most cases, the market won't be fooled.

2. Somewhat Overpriced: About 3/4 of the homes on the market are 5-10% overpriced. These homes will also sit on the market longer than they should. There is usually one of two factors at play here. Either the seller believes in their heart that the home is worth the money despite what the market has indicated (after all, there's a lot of emotion caught up in this issue), OR the seller has left some room for negotiating. Either way, this strategy will cost the seller both in terms of time on the market and the ultimate price received.

Buyer Strategy for Cases 1 and 2: Study the market for what has sold in the last 3-6 months and what is on the market. Leverage this site to get regular updates on the market for the community you are interested in to be an informed buyer. Realize that a house you like that is way overpriced will eventually fall out of favor in the market and leave the door open for you to make a solid case for the offer price you provided based on market data.

3. Priced Correctly at Market Value

Some sellers understand that real estate is part of the capitalistic supply and demand system and will carefully and realistically price their homes based on a thorough analysis of other homes on the market. These competitively priced homes usually sell within a reasonable time frame and very close to the asking price.

4. Priced Below the Fair Market Value

Some sellers are motivated by a quick sale. These homes attract multiple offers and sell fast - usually in a few days - at or above the asking price. Buyer Strategy for Cases 3 and 4: In addition to being fully aware of the market, you have to be fast in making your offer because these homes will sell quickly. Consider the following:

  1. Determine your timeframe and motivation to buy, directly impacting your speed and offer competitiveness.
  2. Offer a high down payment – greater than 20% to provide confidence that the deal will go through and close
  3. Keeping the offer as clean as possible. Don't ask for "personal items" that are relatively inconsequential, like patio furniture
  4. Offer an aggressive closing schedule based on your team's ability to close
  5. If you are in a Seller's market and really want the house– offer the most you are willing to offer, including a full-price offer. Some will even offer more than asking in a multi-offer scenario.
  6. While not always possible, try to develop some rapport with the seller. When everything else is equal, we humans do business with those we like. This is especially true if you are dealing with an owner with some emotional attachment to the property.

When you start looking for a new house, you don't want any unpleasant surprises that could cost you your dream home. By having an understanding of these tips and strategies, you will be well on your way to buying a home that not only meets your needs but gives you enjoyment for years to come. I hope you found this post helpful, but please realize that this is just a small part of the overall process. Please call us at 858-281-4659 to build a plan together to realize your goals.

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