A hot market is a “seller’s market.” During a seller’s market, properties can sell within a few days of being listed and there are often multiple offers. Sometimes homes even sell above the asking price. Though most buyer’s want to get a “deal” on a home, reducing your offer by even a few thousand dollars could mean that someone else will get the home you desire.
A slow market is a “buyer’s market. During a buyer’s market properties may languish on the market for some time and offers may be few and far between. Prices may even decline temporarily. Such a market would allow you to be more flexible in offering a lower price for the home. Even if your offered price is too low, the seller is likely to make some sort of counter-offer and you can begin negotiations in earnest.
More often than not, the market is simply “steady,” or in transition. When a market is steady, no real rules apply on whether you should make an offer on the high end of your range or the low end. You could find yourself in a situation with multiple offers on your desired house, or where no one has made an offer in weeks.
Transition markets are more difficult to define. If the economy slows unexpectedly, as it did in the early nineties, people who buy on the high end of a seller’s market (like the late eighties) could find their home loses value for several years. So far, no one has proven reliable in predicting when markets change or how good or bad the real estate market will become.
When you prepare an offer to purchase a home, you already know the seller’s asking price. But what price are you going to offer and how do you come up with that figure?
Determining your offer price is a three-step process. First, you look at recent sales of similar properties to come up with a price range. Then, you analyze additional data, such as the condition of the home, improvements made to the property, current market conditions, and the circumstances of the seller. This will help you settle on a price you think would be fair to pay for the home. Finally, depending on your negotiating style, you adjust your “fair” price and come up with what you want to put in your offer.
The first step in determining the price you are willing to offer is to look at the recent sales of similar homes. These are called “comparable sales.” Comparable sales are recent sales of homes that compare closely to the one you are looking to purchase. Specifically, you want to compare prices of homes that are similar in square footage, number of bedrooms and bathrooms, garage space, lot size, and type of construction.
If the home you are interested in is part of a tract of homes, then you will most likely find some exact model matches to compare against one another.
There are three main sources of information on comparable sales, all of which are easily accessed by a real estate agent. It is somewhat more difficult for the general public to access this data, and in some cases impossible. Two of the most obvious information sources are the public record and the Multiple Listing Service.
The biggest change facing Buyers, Sellers, and REALTORS® in North Carolina is the form’s introduction of the Buyer’s “Due Diligence” process. During a negotiated due diligence period, the Buyer must complete all of the inspections, surveys, and appraisals typically performed by a diligent Buyer. In addition, the Buyer needs to be satisfied with the documents governing the home, the availability and affordability of insurance for the home, and their own ability to be approved for a mortgage. Should the Buyer not be happy with the investigations…or if they simply change their mind about completing the purchase…the Buyer will be able to unilaterally terminate the contract and be entitled to a return of their earnest money deposit, assuming notice of termination is delivered to the Seller prior to the expiration of the due diligence period. After that expiration date, the Buyer loses their ability to terminate the contract and receive a refund of the earnest money deposit (except in the case of a Seller’s breach) and the power of the contract shifts to the Seller.
The new Offer to Purchase and Contract allows for a negotiated, non-refundable fee to be paid by the Buyer directly to the Seller in exchange for the amount of time associated with the due diligence period. While the “due diligence fee” is not a requirement of the Offer to Purchase and Contract, it will serve as further evidence of the Buyer’s sincerity in pursuing the property. The “due diligence fee” is not refundable to the Buyer except in the case of the Seller’s breach. The fee will serve as a credit to the Buyer should they complete the purchase.
Please click on the link below to see the changes to the 2011 offer to purchase and contract.
OTPC – New vs Old
When you sign a buyer agency agreement it is a legal contract between the buyers and the firm. When you have a good buyers agent you have a teammate of great value and ethics that is there to help you complete the following at no charge to you:
Any buyer’s agent is prohibited from making any comment about your financial situation to the selling party in the transaction. – Seller, selling agent.
Market knowledge is not something you learn overnight. Most sellers will not provide all the details that you as the buyer need to know. It takes experience to learn what information is important in the real estate market and the transaction process.
Negotiations are the part that can get ugly when a seller wants the best price, and the buyer wants to pay as little as possible. When you are the buyer’s agent, you have less impartiality. If you think about your first home, and the home that you raised your kids in, then you know that often times seller’s have an emotional connection to the home they are selling, as the buyer you don’t want to upset the seller with an unreasonable offer. The right agent can help you come up with a good starting point and see through the tough objections that come with negotiations. This is one of the most important aspects of the real estate transaction. I believe that face to face time with the other agent is also important when negotiating in order to establish a report.
Too many times people I have shown property to immediately think that this house is the one, they want to write the contract on the veranda of the home as quickly as possible. I usually will say ok but let’s just come back tomorrow and take one more look to make sure. When we come back 90% of the time the buyer becomes disinterested and doesn’t want to make that offer anymore. The right buyer’s agent will have a constant knowledge of inventory in the area to meet the buyer’s specific needs.
Whenever a new property comes on the market the buyers should always be updated of that new property. The buyer’s agent’s job is to show the buyers everything they asked to see.
If you are looking to buy a house check out www.scottbrowder.com and see if you can find something you like. I would love to represent you as the buyer’s agent in the search for your dream home. email@example.com
Scott Browder (Agentscott)