Mistakes you can make with a lowball offer

Yes, yes, I know.  It’s a buyers’ market.  So much inventory, low housing prices, so the buyer gets their pick at the price they want.  But not so fast.  Yes, lots of inventory, lower housing prices.  However, there is still power to negotiating.  And you don’t want to insult the seller with a lowball offer and lose your dream home because of it.  Here are some mistakes that can be made with a lowball offer:

1. Not knowing the market.  And each one is different.  What may be a more acceptable offer in one market won’t be the same in another.  There could be an area where sellers are pricing homes more aggressively; therefore, they’re sticking close to their asking price.  Another neighborhood might be mostly made up of foreclosures and short sales, so the bank wants to get rid of the home ASAP and are willing to accept less.  So you’ll need to do your research with the help of a qualified Realtor (see #2)

2. Not picking the right Realtor.  They have the experience and the background and know the area you’re looking to purchase, so they’re your best asset going into a negotiation.  But you have to make sure they’re solid negotiators, since they are working on your behalf.  They’re not going to tell you not to present a really low offer, but they might say the sellers will reject it offhand so you might want to consider raising it by X amount or offering to waive one of your contingencies.  Trust their advice.  You’re working as a team and you want to make sure your agent also has your best interests at heart.

3. Not knowing what you’re willing to pay.  A lot of people these days in this market are focused on getting the best price.  But you have to be careful.  You have to know what your limit is so you don’t overpay.  And sellers will know what they need to walk away from the closing table or they won’t be able to make the sale.  No matter how wonderful the home is and how perfect your furniture will look in it and that you can see yourself having your morning coffee on the deck overlooking the pond, there comes a point where no deal is worth it at a certain price. Know that before you start negotiating or you’ll let your emotions get the better of you.  

You can also lose your positioning power by being too hard a negotiator at the beginning.  Don’t make your first offer your final offer and then start negotiating.  The seller will know that you aren’t serious and has the ball back in their court.  Make your offer one that you’re willing to negotiate and have your Realtor tell the seller you want to work with them and make the deal happen.

This MSN article has a few more mistakes that can be made and how to avoid them.  My Web site has some other great articles and tips for buyers.  Have a great week!

What Realtors do for buyers

For those new to purchasing real estate, I wanted to clear up a few misconceptions about Realtors and let you know exactly what we do and don’t do for buyers.  For example, a lot of people are under the assumption that buyers have to pay for our services.  100% not true, especially in Illinois.  We are paid by the seller of the property you purchase, so there is no money to use our services.  So I’m always surprised when people tell me they want to look on their own.  Here are some advantages to using a Realtor.

1.  Access to more listings.  If a home is listed by another Realtor for sale, that person is not going to be posting separate for sale ads in the newspaper or online.  So you can miss a ton of great deals by working on your own.  We have access to the Multiple Listing Service, the only place where listed properties go.

2. Negotiating skills.  We know the market.  We have access to all the comparable properties – what has recently sold and for how much.  This will help you to get a much better deal because you’ll have solid evidence and a strong purchasing position.

3. Letting you know about resale value.  Especially for first-time buyers, a lot might not understand what makes a home more valuable when it comes time to sell in the future.  It is my job to point out that the fact that these sellers converted a 3-bedroom home to 2 huge bedrooms might not be such a great purchase.  For example, if it’s in a subdivision near an elementary school where a lot of families live, they would want that extra bedroom.  So a Realtor will give you insight as to what has a better chance of selling.  Because most likely this won’t be the one home you’re in forever.

4. Getting you to closing.  I wish it was as easy as signing  a contract, showing up with a check, and then signing the closing papers.  Unfortunately, that’s not the case.  Aside from the buyers and sellers, there’s attorneys involved, home inspectors, lenders, appraisers, other Realtors, etc.  Each person has to be contacted at different points once the contract is signed to make sure everything is progressing smoothly.  I make contact with all these individuals to make sure deadlines are being met, letters are being drafted, and funds are provided.  This is to ensure that closing happens and it goes smoothly.

I’d love to help you with your first home purchase.  If you need my assistance, please contact me via my Web site or call me toll-free at 800-858-7917.

And a very Happy Holidays to all of my readers!  I won’t be posting on Christmas, but I’ll make sure to have another blog up early next week.

 

Finding a home that won’t lose value

Given the current state of the economy, for all of you home buyers out there, I’m guessing that, when you do find a home you’re going to purchase, that you want to find one that won’t lose value.  You’ll want to look for features that will appeal to a seller when you do go to sell, whether that’s in one year or 20.  Here’s a quick list of features in homes that won’t lose value in a recession.

1. Choose a single-family home.  Sure, you may be starting out and want something small, preferably a condo.  However, in a worse economy, condos and townhomes lose their value more quickly than a single-family home.  So ask your Realtor to help you find a smaller detached home.  I have sold many first-time buyers one- or two-bedroom single-family homes, which was just the right size for their needs.

2. Keep carrying costs low.  When you do go to buy, make sure you find a property that is well-maintained and one that doesn’t require a lot of work over time, especially if you don’t plan to stay long.  New buyers get scared with all the costs of a mortgage, taxes, insurance, and maintenance, so whatever you can do to keep costs low will help you in the long run.  Here’s another tip.  If you see a problem, such as water dripping from the roof, make sure to take care of it BEFORE it turns into a large hole, which will just cost you more money because you waited.

3. Know your market.  Certain markets will never lose much value because they are important to certain segments of the population.  For example, a home within walking distance of the Metra in the Chicago suburbs is a great feature for commuters heading into the city.  A home with a swimming pool is going to sell quicker than one without in Arizona.  

4. Keep your kitchen and bathroom up to date.  As I have mentioned in the past, if you’re going to update or remodel any room in your home, these are the two to focus on.  These are the biggest rooms that “sell” a house.  Try to include appliances if you can.  Many first-time buyers don’t have these at their disposal, and it’s another thing that will help keep their costs down.  If you must take yours with you, consider offering an appliance credit instead.

I hope these tips help both potential buyers and sellers.  And to all my readers, have a very Happy Thanksgiving!  Visit me online.

Your online activity could cost you a home deal

With the influx of people using social networks today, such as Facebook and Twitter, it’s very common to know all the going-on of your friends and family.  It’s great to find out where everyone is when, and share important news stories and photos.  However, when it comes to real estate, it’s best to be cautious with what you post.  Here’s why:

In a recent MSN article, a real estate agent mentioned how her client lost a house.  She was looking in a particular neighborhood and went online and posted something like “We found out dream house in XYZ neighborhood!”  Well, one of her friends saw the post and shared it with another friend who was looking in that same neighborhood at the one house for sale.  That person went and offered more money and ended up buying the home.

I’ve always told my clients never to give out information until a deal is closed, especially the price paid, because if something happens before you get to closing, now someone has information on what the seller was willing to take and could offer a better price.  This is also why real estate agents never share what a home goes under contract for until it sold.

You also have to be careful when posting pictures because other people may be able to recognize the home.  But not all social network activity surrounding buying or selling a house is bad.  Here is when it’s okay to post.

1. You’re the seller and want people to know your house is available.  The more people that know about it, the more potential buyers you’ll see.

2. Asking what people know about a certain town in terms of schools, activities, etc., especially if you’re new to the area

Otherwise, you can figuratively stick your foot in your mouth by posting something that other people shouldn’t know.  And for security reasons, never post that you’re going to be viewing open houses or out looking at houses because then people know you’re not at your home!

I’d love to hear more thoughts on this subject.  Please leave me a comment or visit me online.

 

Be aware of this when applying for a mortgage

With all the extra housing inventory available, it’s a great time for someone looking to invest in real estate to buy a home.  We all know, though, that it’s becoming tougher to obtain a mortgage these days.  Mortgage brokers and banks want solid credit scores and higher down payments.  So if you are making an application for a mortgage, here’s a list of what you want to be aware of during this typical 45-day period to make sure the mortgage goes through.

1. Now is not the time to make any big purchases.  That includes high-ticket items such as cars, appliances, TVs, and furniture for your new home.  A lot of people don’t realize that when you make your purchase, you’re creating more debt for yourself (if you’re charging the item rather than paying cash) and becoming a bigger liability for the bank.  So it’s been known that the mortgage can be pulled in this instance.  Wait until after you sign the closing papers to make the next purchase.

2. It’s not a good time to switch jobs.  When applying for a loan, the lender looks to make sure you have job stability and knows what type of salary and/or bonuses and commissions you receive.  If you switch jobs in the midst of the application, they’re going to have a hard time verifying salary information, which could affect your loan.  Again, wait until after you sign the closing papers to make any career moves.

3. There could be multiple credit checks.  The lender obviously checks your credit at the loan application before they decide if they can pre-approve you.  However, now lenders are often going back to check credit scores again right before closing.  So know that you want to continue making all your payments.  Avoid applying for a new credit card or making a big purchase.  Any upset to your score could affect your mortgage.

4. Have money ready for closing costs.  Don’t take every last penny you have to use toward a down payment.  Closing costs could cost you an additional 3% out of pocket.  You’ll want to check in with your lender within a few days of closing to get a rough estimate of the amount you’ll need to bring to closing.  It’ll most likely have to be in the form of a cashier’s check made out to yourself.  Your lender can give you the exact information.

These tips will help keep the mortgage application going without any hiccups.  Of course, if you have questions or problems along the way, be sure to contact your lender.  They will be able to guide you through the process and give you other tips to make sure there are no problems prior to closing.

I can be reached via my Web site.