How and When to Bid Low on a Property

 

With prices stagnant or falling and inventory up in many markets, home sellers are no longer automatically turning up their noses at offers that come in far below their asking price.

 

Buyers who make offers asking for deep discounts still risk offending sellers to the point where they quash any deal.  Some real estate professionals suggest that before making an aggressive offer, some homework is in order.  Buyers might want to effectively explain why the price of a home should be lower.

 

Here are some guidelines on how — and when — to make an aggressive bid:

 

1. Learn how motivated the seller is to make a deal.

 

• Certain sellers are going to be more willing than others to negotiate a low offer — and there are several reasons which might indicate more leeway on price.
   
• If the sellers have already purchased another home and that sale has closed, they're usually more likely to be willing to make a deal.
   
• If the property has been on the market for a long time, sellers will be interested in entertaining any offers.
   
• Overall local market conditions also play a role.  Is the market sluggish, or is it still a hot or competitive market?

 

2. Make your case with hard facts.

 

According to Jon Boyd, an Ann Arbor, Michigan broker and president of the National Association of Exclusive Buyer Agents, "When you're making the offer, if you justify that offer with outside data, then it's much less likely to be perceived as being an insult or [the buyer] not as serious."  When putting together an aggressive offer for a client, Mr. Boyd doesn't just hand the seller a purchase agreement with the price the buyer is willing to pay — he creates a cover letter explaining exactly where that number came from. 

 

In addition to citing comparable sales in making the offer, it also could be important to include details regarding the amount of inventory in the immediate surrounding area, he says.

 

3. Prepare for the possibility of rejection or negotiation.

 

Dick Gaylord, president elect of the National Association of Realtors and a broker in Long Beach, California says he warns buyers making very low offers that the seller might refuse to negotiate.

 

Danielle Kennedy, a real-estate sales coach and author based in Pacific Palisades, Calif., advises sellers not to think of a low offer as an insult but as "a sign of interest."  It "begins the dialogue regarding the purchase of your house," she says.

 

Have you made an offer on a property that you (as the buyer) thought may have insulted the seller due to the low offer?  Have you (as a seller) received a "low-ball offer" from a potential buyer?  We'd love to hear your comments either way.

 

 

How Not to Lose Your Home to Foreclosure

 

The most obvious way not to lose your home to foreclosure is by always making your payment on time.  That's a given, but sometimes, things happen.  As a growing number of borrowers fall behind on their mortgage payments.  If you fall into this ever-growing category of homeowners, the smartest move you can make is to contact your lender.

 

These days, there's more incentive for companies to work with borrowers to avoid foreclosure: Regulators and lawmakers, prompted by troubles in the mortgage market, are encouraging companies to assist troubled borrowers.

 

Major lenders in the subprime mortgage market have agreed to a set of principles calling for servicers to try to modify loans before the interest-rate reset if borrowers will be unable to afford the new payments, among other actions.

 

Lenders also have a financial incentive to keep you in your home: They can lose tens of thousands of dollars for each loan that goes into foreclosure.

 

Contacting your lender before your situation seriously deteriorates will improve the chances that you keep your home. Consider this: Half of borrowers whose homes go into foreclosure never talk to their servicer.  How crazy is that?

 

Call your loan servicer:  By doing so, you can try to arrange workout options that will keep you in your home. A lender may be able to modify the loan to make it more affordable in the long term.

 

The very LAST THING you should do is just not contact anyone and continue to get further and further behind on your mortgage payments.

 

We welcome your comments or reaction to this advice.  If you have any experience in this category, or advice for any other readers at this site, please leave your comment below.

 

 

Home Inspections: For New Homes Too!

 

There are a lot of different things that need to be inspected upon the purchase of a new home.  A common misconception by many home buyers is that simply because their home is newly constructed an inspection is unnecessary.  Nothing could be farther from the truth.  New homes require an inspection just as much as any older home, and they have a special set of considerations that need to be examined.  Home inspectors are part of the buying and selling process for the protection of the buyer and it is the buyer who is responsible for arranging their own inspection.  If sellers (or in this case, builders) are hesitant to have their home inspected or try to convince you to skip the inspection then you could have a serious concern on your hands.  What are they trying to hide?  Never buy a home (new or used) without having a full inspection performed.

 

Home inspectors are trained to find things that could be huge issues to the home buyer.  Typically they are concerned with the vital systems that are essential to the proper operation of the home.  Systems like plumbing pipes and fixtures, the electrical system, septic system (if there is one) are all checked for wear & tear, quality and proper installation.  The foundation needs to be examined for cracks and stress fractures.  This kind of imperfection in the home's structure can be quite dangerous and expensive to repair.  However if left unattended to it can cause huge problems later on in the home's life.

 

Mold is another issue altogether and most home inspectors are not properly educated in the identification of and dealing with the various kinds of mold that can be found in homes.  In fact, the best method of finding out about mold in the home is to hire a professional mold specialist.  These professionals are trained in the identification of various forms of mold and can better inform you on what kinds of mold are harmful to your health as well as the correct ways to remove the mold so it does not take hold in your home again.

 

Always be sure to have any home you are considering purchasing inspected.  It is the only way to ensure that your investment is a wise one and that your family is safe and protected.

 

 

Selling Your Home?  Offer Concessions Instead of Lowering the Price

 

Lowering the asking price on your home isn't the solution to making it stand out in today's crowded housing market.  According to the National Association of Realtors, there is nearly a nine-month supply of homes for sale on the market.

 

How will you make your home stand out among all those other ‘For Sale' signs?

 

One way experts say to stand out instead of slashing the asking price is to propose lowering the rate on a potential buyer's mortgage by providing seller financing incentives.

 

Consider this example showing the difference in cost and savings for lowering a home's price vs. offering seller concessions.  In the case of lowering price, a motivated seller might reduce their $250,000 asking price by 5% or $12,500.  For less money, the seller could pay up to three discount points on the buyer's mortgage, lowering the buyer's interest rate and monthly mortgage payment.  A discount point is considered 1/100 of the buyer's loan amount - about $2,500 per point in this example.

 

The math is simple. Seller concessions cost the seller $7,500 in this example (vs. $12,500 to lower the price of the home 5%) and the deal is actually more enticing for the buyer.  At today's 30-year fixed rate, three points off a mortgage rate can potentially save a buyer more than $30,000 in mortgage payments over the life of the loan!  And, points paid through seller concessions may even be tax deductible.

 

By offering a concession to lower the interest rate, the seller makes their home more affordable, without dropping their price.  This gets them to the closing table sooner.  The buyer actually may save more in reduced interest over the life of the loan than they would have via a lower home price, depending on the rate and terms of their mortgage.

 

Other examples of seller concessions that buyers can offer include paying some or all of the buyer's closing costs, and providing an allowance for the buyer to landscape or make improvements to the home.

 

Seller concessions can be an inexpensive and innovative way to move a house in a slow market.  Both the buyer and seller may benefit from such seller concessions.

 

 

Latest Home Prices: More Up Than Down

 

The median price for a single-family home sold during the three months ending June 30 fell to $223,800, 1.5 percent below the price a year ago.

 

Some of the results of the survey from the National Association of Realtors were more positive.  More metro area markets - 97 of 149 - gained ground than lost.

 

One of the four U.S. regions, the Northeast recorded a slight price gain of 0.7 percent.  The West lost 0.4 percent, the South 1.6 percent and the Midwest 2.2 percent.

 

NAR predicts home prices will turn slightly positive again by spring of 2008 and rise about 2 percent that year.