Buying a home can be a stressful event, especially if it’s your first time. It's more than likely that you only have limited knowledge about the market. For that reason, it's important to be ready before starting the process, as even in a buyer's market properties can be highly competitive if priced well.
Knowing the market is the first step to buying a home. Instead of rushing in and shopping around, it's advisable to know your ideal home, and what homes like it have been selling for. A recent post from Trulia explains how research is the best place to start. Your A-Team buyer's agent will have all the information on recent sales that you will need.
Do Your Research
Start by researching local selling prices for homes comparable to the one you’re looking to buy. This will give you an idea of the fair market price. Also, check the history of the property — when the seller purchased it, and for how much. A seller who bought a home several years ago and has seen some appreciation in its value may be more willing to negotiate on price than a homeowner who purchased a home more recently.
If you are working with a real estate agent, which we highly recommend, ask for his or her input on what you should offer. Your agent should have extensive knowledge and experience on comparable home transactions and the best offer strategy for the particular home you’re interested in. Read more...
Always do your research on the local market prices and the seller. This can help you come up with reasonable prices with which to use as the basis of your offer and negotiation.
Do your research first!
Of course, long before this part of the process, you will likely have done some research to understand is how much you can afford. Your bank may set this limit or your personal preference. Without budgetary self-discipline, depending on your ideal location and style of home, you could end up going beyond what you can handle. An article from Keeping Current Matters details why you should spend time on the issue of money, even after getting pre-approved:
Understand How Much You Can Afford
This ‘tip’ or ‘step’ should really take place before you start your home search process.
As we’ve mentioned before, getting pre-approved is one of many steps that will show home sellers that you are serious about buying, and will allow you to make your offer with the confidence of knowing that you have already been approved for a mortgage for that amount. You will also need to know if you are prepared to make any repairs that may need to be made to the house (ex: new roof, new furnace). Read full list here...
Figuring out what you can afford is essential in the process of offering for a house. It allows you to manage your budget for your future home and prepares you for additional expenses after your offer is accepted.
One common mistake buyers make, and which you would do well to avoid, is to automatically low-ball. While it may be tempting in a buyer's market, an unresearched lowball carries the risk of backfiring completely, according to Realtormag. This is especially the case if you actually really want to own the property you are offering on. Don't get us wrong low-balling has its place when negotiating against sellers who have unrealistic list prices (especially in this market). The point is though, that a ton of research should go into valuing the home prior to making one's mind up on the offer price and your top line. It is also too easy to become obsessed with the size of the discount we achieve off the list price, so be careful not to focus too much on that.
Making an Offer: 5 Mistakes to Avoid
Submitting a lowball offer
Lowballing a seller often backfires, particularly in a seller’s market. “A lowball offer that isn't backed up with math or comparable sales data is disrespectful and could turn off the seller and possibly mean you will miss out on the property completely,” Sandholm says. Read full list here...
In summary, negotiation is all about getting a low price relative to the estimated value of the home. There is always an "optimal strategy
" to achieve that. As buyer's agents, it's kind of our thing!