Writing a Contract in a Buyers Market
A buyer’s market occurs when listed homes are on the market longer than 30-45 days, causing an over abundant supply of homes for sale in a specific area. Another precursor is the steady decrease in home values in that region over the previous 6 months. Here are a few tips to help you take advantage of a buyer’s market:
1. Request listings from your Realtor.
It’s very common for people to begin searching for homes on the internet, without the help of a Realtor. Online searches are a good starting point, however the information you are viewing is normally outdated, off the market, or just ad bait (realtors advertise premier sold properties in hopes that you will call them). Having your Realtor send you information from MLS is a sure way to know you are receiving current listings and accurate information.
2. View homes that have been listed longer or have recently reduced their price.
There is a higher sense of urgency when selling a home than there is buying one. Therefore, sellers with homes that have been listed for 30, 60 or 90 + days are generally more willing to accept lower offers. You will also find that recently reduced asking prices point to an anxious seller wanting to unload their property quickly. These are always worth looking into because you could potentially be getting your ideal property and a great price.
3. Do your homework.
It’s important to have comparable sales to the home you are placing an offer on. They not only tell you how amenities price out on properties in that area, but they will also give you an idea if you are getting a fair deal or not. The comparable data sheet should contain active listings, pending sales, recently sold listings, and the following specific information:
· property address
· square footage of lot and home
· number of days listed on the market
· sold price
· closing cost help from seller
· age of home
· number of bedrooms and bathrooms
4. Do not waive your contingencies.
Write your contract with contingencies that will protect you in the event that what you have asked for is not delivered by the seller. For instance, if you write a home inspection contingency, you have the power to negotiate with the seller to meet your terms or even back out of the contract without forfeiting your earnest money deposit.
5. Ask for additional credits.
If you are not happy with the color of paint, quality of carpet, etc., you can negotiate for the seller to offer a credit towards replacement of the undesired item. Be sure to check with your loan officer first to ensure it falls within the guidelines of the loan program you are using.
6. Negotiate to have your closing costs paid by the seller.
Once you know what your costs will be for the loan and home, you can take negotiate with the seller for them to pay a portion or even all of it. Lenders normally allow up to 6% of your purchase price to be paid by the seller, but once again, please check with your loan officer about the possibility.
7. Every buyer has the right to a home inspection.
A home inspection should never be waived, especially in a buyer’s market (see Choosing the Right Home Inspector for more information). If the home inspector finds anything that you are not happy with, you can use the results to back out of the contract with no ramifications or loss of deposit.
8. Request the seller to pay for a home warranty.
It’s not unusual that multiple repairs need to be made within the first year of home ownership. To help with the cost, a home warranty will cover major repairs to appliances or systems in the house after you have moved in, up until the end of the policy’s coverage period. Normally, sellers in a buyer’s market will offer a one year home warranty with the sale of their home, but if not, it certainly doesn’t hurt to ask!
9. Request minimal turnaround time on your offer.
As stated before, a buyer’s market usually means sellers are more willing to bend on their expectations. Therefore, when writing your offers, be sure to include a contingency only allowing the seller 24 hours to respond.
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