Tag Archives: contracts

Price is not all that matters in real estate sales

Negotiation strategies differ depending on how well the home is priced and who’s on the other side. If you’re trying to buy a short-sale listing where the lender has to agree to accept less than the amount owed, the seller doesn’t have much say in the negotiations about price unless he can contribute money to pay down the loan amount.

Regardless of who you’re dealing with, you’re more likely to grab a seller’s or lender’s attention if you are preapproved for the mortgage you’ll need and can provide verification of cash for the down payment and closing costs.

Many buyers feel that cash is king. If buyers are willing and able to pay all cash with no mortgage, no hassling with the lender and no appraisal contingency, they feel they’re owed a price concession.

Not all sellers agree. Some, who are confident in the value of their home, would rather work 

with an offer from a well-qualified buyer who needs to obtain a mortgage but who will pay a higher price.

Before you start negotiating, you should understand as much as you can about the other party. For instance, if the sellers are moving to a retirement home, they might go for the highest-priced offer in a multiple-offer situation, even though it might not be ideal in other regards. If they are liquidating their last asset, every penny will count.

An all-cash or large-cash-down buyer might not be able to negotiate a “deal” based on the fact that no 

lender will be involved. But if the home is a good value and suits your long-term needs, you might increase your offer price and include a mortgage. This way, you conserve cash for other uses.

HOUSE HUNTING TIP: Many buyers don’t want to negotiate. They want their first offer to be their best offer. Usually, the only time this is effective is if yours is the only offer, the house is priced right for the market, and you offer full price. In this market, you’re better off planning for some negotiation, and not putting all your cards on the table at once.

In most areas, the home-sale market still favors buyers. A lot of sellers are selling for less than they paid. Some have to bring money to the closing. Sellers who have owned for years are selling for less than they would have years ago. It’s natural that they would want to try for the highest price possible.

Negotiations are about more than price. Generally, the fewer the contingencies or the cleaner the contract, the more attractive it will be to the seller. Closing and possession dates can become issues at the bargaining table. What’s included and excluded, time periods to satisfy contingencies, and virtually everything in the contract is negotiable.

Since everything is up for grabs, be clear about what’s not negotiable — for instance, you can’t go over a certain price. Show flexibility in areas that will hopefully be valuable to the sellers, such as buying “as is” regarding some needed repairs. Don’t waste your time with sellers who are firm at a price that is considerably over market value. Wait until they become realistic while you continue looking. Some sellers eventually get tired of having their home listed and reduce the price to market value. Others don’t.

Sellers need to understand that buyers in today’s market will walk away from a negotiation if they feel they’re not getting anywhere or are being treated unfairly. Buyers could become suspicious or disappear if they’re told by the sellers or their agent that other buyers are lining up to make an offer when they aren’t.

THE CLOSING: A smart strategy is to defend your position while being honest and fair with the other party.

Dian Hymer is a nationally syndicated real estate columnist and author.

Price is not all that matters in real estate sales

Negotiation strategies differ depending on how well the home is priced and who’s on the other side. If you’re trying to buy a short-sale listing where the lender has to agree to accept less than the amount owed, the seller doesn’t have much say in the negotiations about price unless he can contribute money to pay down the loan amount.

Regardless of who you’re dealing with, you’re more likely to grab a seller’s or lender’s attention if you are pre-approved for the mortgage you’ll need and can provide verification of cash for the down payment and closing costs.

Many buyers feel that cash is king. If buyers are willing and able to pay all cash with no mortgage, no hassling with the lender and no appraisal contingency, they feel they’re owed a price concession.

Not all sellers agree. Some, who are confident in the value of their home, would rather work with an offer from a well-qualified buyer who needs to obtain a mortgage but who will pay a higher price.

Before you start negotiating, you should understand as much as you can about the other party. For instance, if the sellers are moving to a retirement home, they might go for the highest-priced offer in a multiple-offer situation, even though it might not be ideal in other regards. If they are liquidating their last asset, every penny will count.

An all-cash or large-cash-down buyer might not be able to negotiate a “deal” based on the fact that no lender will be involved. But if the home is a good value and suits your long-term needs, you might increase your offer price and include a mortgage. This way, you conserve cash for other uses.

HOUSE HUNTING TIP: Many buyers don’t want to negotiate. They want their first offer to be their best offer. Usually, the only time this is effective is if yours is the only offer, the house is priced right for the market, and you offer full price. In this market, you’re better off planning for some negotiation, and not putting all your cards on the table at once.

In most areas, the home-sale market still favors buyers. A lot of sellers are selling for less than they paid. Some have to bring money to the closing. Sellers who have owned for years are selling for less than they would have years ago. It’s natural that they would want to try for the highest price possible.

Negotiations are about more than price. Generally, the fewer the contingencies or the cleaner the contract, the more attractive it will be to the seller. Closing and possession dates can become issues at the bargaining table. What’s included and excluded, time periods to satisfy contingencies, and virtually everything in the contract is negotiable.

Since everything is up for grabs, be clear about what’s not negotiable — for instance, you can’t go over a certain price. Show flexibility in areas that will hopefully be valuable to the sellers, such as buying “as is” regarding some needed repairs.

Don’t waste your time with sellers who are firm at a price that is considerably over market value. Wait until they become realistic while you continue looking. Some sellers eventually get tired of having their home listed and reduce the price to market value. Others don’t.

Sellers need to understand that buyers in today’s market will walk away from a negotiation if they feel they’re not getting anywhere or are being treated unfairly. Buyers could become suspicious or disappear if they’re told by the sellers or their agent that other buyers are lining up to make an offer when they aren’t.

THE CLOSING: A smart strategy is to defend your position while being honest and fair with the other party.

Dian Hymer is a nationally syndicated real estate columnist and author.

Existing-Home Sales Rise Unexpectedly in October

Sales of previously owned homes got an unexpected boost last month while the number of homes on the market continued to decline, according to data released Monday by the National Association of Realtors (NAR).

The trade group recorded a 1.4 percent month-over-month increase in existing-home sales in October, pushing the annual rate of sales to 4.97 million. NAR’s latest reading is 13.5 percent above the 4.38 million-unit sales pace in October 2010.

Housing inventory fell 2.2 percent to 3.33 million existing homes available for sale as of the end of October, which represents an 8.0-month supply.

That’s down from an 8.3-month supply in September. NAR says the housing supply has been trending gradually down since setting a record of 4.58 million in July 2008.

Distressed homes – foreclosed REOs and short sales – slipped to 28 percent of October’s transactions, down from 30 percent in September. They were 34 percent in October 2010.

NAR says 17 percent of last month’s existing-home sales were foreclosures and 11 percent were short sales.

Market analysts were expecting up to a 3 percent drop in overall existing-home sales between September and October. Forecasts ranged between an annual rate of 4.76 million and 4.80 million.

According to NAR, October home sales should have risen higher than the 1.4 percent the trade group recorded.

According to Lawrence Yun, NAR’s chief economist, contract failures reported by Realtors jumped to 33 percent in October from 18 percent in September. Only 8 percent of contracts fell through in October of last year.

“A higher rate of contract failures has held back a sales recovery,” Yun said. “Home sales have been stuck in a narrow range despite several improving factors that generally lead to higher home sales such as job creation, rising rents, and high affordability conditions. Many people who are attempting to buy homes are thwarted in the process.”

NAR’s report shows the national median existing-home price was $162,500 in October, which is 4.7 percent below October 2010.

“In some areas we’re hearing about shortages of foreclosure inventory in the lower price ranges with multiple bidding on the more desirable properties,” Yun said. “Realtors in such areas are calling for a faster process of getting foreclosure inventory into the market because they have ready buyers.”

Yun adds that extending credit to responsible investors would help to absorb distressed inventory at an even faster pace, which he says “would go a long way toward restoring market balance.”

NAR’s data indicates investors purchased 18 percent of homes in October, while first-time buyers accounted for 34 percent of transactions. All-cash sales made up 29 percent of last month’s purchases.

This article is by DSNews.com.