5 Strategies for Navigating the Summer Clearance Sale - on Real Estate!
Posted under: Market Conditions,
Home Buying,
Foreclosure
|
May 17, 2011 11:26 PM |
27,292 views |
66 comments
Home
prices are low, interest rates are low - real estate is basically
having a summer clearance sale! But unlike buying a clearance-priced car
or computer, making the wrong move in this real estate 'sale' can have
disastrous effects, from losing your dream home due to a bad bid to
ending up with a money pit of a property. Here are a few money-saving, pitfall-avoiding tips and tricks for buyers who want to do some smart home shopping this summer.
1. Have a vision in place, before you start your house hunt. Actually, have several visions in place. Have a financial vision, complete with a clear picture of what your total income and expenses look like, in the “after homebuying” view, including what you pay out for your home and related expenses, like HOA dues and homeowners’ insurance. Have a vision of your life in your new home, including what you want to do, with whom and where you want and need to go - in the work, family and recreation areas of your life.
If you kick off your conversations with your mortgage broker and real estate agent with a clear understanding of the lifestyle you are looking to create, you’ll be much less likely to get derailed. With a clear vision in place and, ideally, on paper, you can clearly communicate your wants, needs, goals and financial boundaries to your professionals, telling them what you can afford, rather than trying to shoehorn your financial plans into one-size-fits-all mortgage guidelines. With a vision, the temptation of an uber-low-priced, but completely inappropriate, home will not lure you into buying the wrong place for your needs. (Nor will an amazing home that is simply out of your personal price range - no matter how great a value it is for the money!)
2. Don’t let affordability get between you and reality. High affordability doesn’t necessarily mean you can get every single thing you want - and name your price. The fact is, even people who are spending millions for their homes don’t get everything they want! I’ve seen buyers insist that they need X number of bedrooms and Y number of bathrooms in move-in condition for a price that is just not going to happen, even in this clearance sale climate, and end up looking and looking, ad infinitum.
If your agent has shown you home after home that is what you want, but has sold for more than you want to spend, and you’re confident that you can find or cut a better deal because the market is down and you just os happen to be a brilliant negotiator (!), you might be at risk of falling into this trap. There are deals to be had, but if you don’t stay grounded in reality, you’ll end up chasing your tail and missing out on the tax and lifestyle advantages of homeownership.
If you’ve been house hunting for months and months on end, your agent keeps trying to tell you that you should search in a lower price bracket, you have repeatedly gotten overbid or you just can’t seem to find the precise home you seek in the location and price range you seek, at least consider the possibility that you might have an outsized wish list for your budget. Take a step back, revisit your vision, and remind yourself what’s really important. It’s okay to save some “must-haves” and “deal-breakers” for your next home purchase!
3. Get a local expert to brief you on the local market, then screen out the noise. Now more than ever, it’s essential to have laser beam focus on the information and strategies that will get you what you want - whether it’s an amazing deal on the home you’ve always wanted or simply success at becoming the owner of your first home at a price you never thought would ever be possible. Otherwise, you’ll end up all over the place, spending your time, money and sanity attending auctions, getting worked up over distressed properties that aren’t yet for sale, trying to negotiate deals with sellers who are in no position to cut them and having your lowball offers on bank-owned properties rejected time after time.
Don’t let a news story about a guy in Minnesota who got a home for $3.27 be the basis for your entire home buying strategy. Instead, ask around and get referrals to a local broker or agent who has a track record of helping the people you know. Read their answers on Trulia Voices and ask them your own questions to get a sense for whether they might be a good fit for you - if they are, and you trust them, then consult with them on the dynamics of your local market. The market is down everywhere, relative to 2006. But some markets - and some neighborhoods within markets - are still seeing multiple offers and home prices which are relatively recession-proof, compared to what you’d expect from the national news.
Once you have a strategy in place, work it - don’t let your acupuncturist or shoe repair guy convince you that your strategy is wrong, that you could get the place for cheaper or that the bank should absolutely do every single repair, or you should walk away from the deal. Many would-be buyers lose out on great homes because they take negotiating advice from their holistic veterinarian over that being offered by their broker or agent.
4. Read everything. Good faith estimates. Contracts. Disclosures. Inspection reports. There is a long, long list of multi-page documents that are very easy to “just sign” when you’re in the heat of the hunt and think you’re on the scent of an amazing deal. I’m not suggesting you ask for a week-long pause button to read every document, either - rather, read them when you get them, ask questions, and keep asking until you understand the documents.
Many buyers this summer will make offers on more than one home before they get into contract on “the one,” and many of those properties will be short sales or foreclosures. With distressed properties, every contract is different, so it behooves you not to go on autopilot, just skimming the papers as you might otherwise. Also, inspection reports might reveal red flags and condition issues that you’d normally expect to see in the seller’s disclosures. It’s especially critical, in these situations, to fully understand as much as you can about the property, your loan, and your obligations and due dates under the contracts.
5. Stop your mental accounting and do the actual math - on paper. In the field of behavioral economics, mental accounting refers to the tendency we humans have of doing math in our heads, separating things like easy money (e.g., the so-called “instant equity” from buying a home for less than it’s supposedly worth) from hard-earned wages and salary, and making spending decisions differently from these different mental accounts.
On the scent of a good deal, and in the heat of the hunt, even the most meticulous homebuyer can go up a few thousand in offer price to beat out other buyers. No problem, right? Well, but then when the inspector uncovers a few needed repairs, they make a mental guess as to what they’ll cost, and add that in - again, mentally. Then, when the lender requires a few extra thousand bucks than expected to close, that goes on top, but again, only mentally. And mental money tends to stretch a bit longer than real money does!
So, you can see how it’s possible to break the bank when you thought you were in great shape because you scored such a great purchase price for the property itself.
Even if you hate budgets with every iota of your being, buck up on this one project, pull out the calculator or open up a spreadsheet and keep track of every line item. Get actual repair bids during your inspection period, to the extent possible, and get your math mojo on. It’s fine to buy and incur these overages here and there, but keeping track of them is key. You know what I like to say - surprises are for birthday parties, not for real estate transactions, and not for your bank account, either!
Keeping a strict tab on the expenses you incur during the transaction - or will need to incur afterwards -- will save you so much drama later.
P.S. - You should follow Trulia and Tara on Facebook, too!
Share this blog
Categories
General Area (27)
Quality of Life (7)
Market Conditions (36)
Home Buying (117)
Home Selling (64)
Financing (35)
Tech Tips (1)
Curb Appeal (2)
Foreclosure (21)
Celebrity Homes (1)
Going Green (2)
Design & Decor (4)
In My Neighborhood (12)
How To... (2)
Rental Basics (1)
Rent vs Buy (9)
For Rent (1)
Property Q&A (7)
Home Insurance (1)
Moving (1)
Credit Score (10)
Rentals (2)
Locations
Oakland (19)
San Francisco (26)
Copyright © 2012
Trulia, Inc. All rights reserved. |
Fair Housing and Equal Opportunity
Have a question? Visit our Help Center to find the answer
Comments
Thanks for posting.
Helene M Moore Windermere Prestige Properties Henderson Nevada
Andrea Deranian, Trillium Real Estate
Ann Arbor, Michigan
Thanks again!
So we have several brokers posting here maintaing that they have to give their naiive buyers a reality check, lead them by the nose to the near asking price and make a quick commission. Another charade, is Keller Wilalms', practice of trying to convince a buyer to sign an exclusive buyers contract to to look for properties.
Fortunately at this point I am a Cash buyer and they are practicaly shinming my shoes. I'm in Soutbay Ca., and many brokers are still spoiled and dellusional. I have fired three of them in the last year, made one transaction using the seller's agent and I'm still looking for another good deal. I remain businesslike and civil with these brokers, but maintain control and they know it. I like the look on their faces at my first offer, which is usually about 30% under, unless the propoerty is priced right., which few are in the Southbay. Also, many brokers are sloppy on the sales contract and addendums, read them carefully and make all figures are correct and the seller has initialled and dated all provisoins. Recently in escrow on another property, and my broker was so damn hungry for a commission, he they tried to convince me to move full funds in before the paper work was in order. (short sale). I have caught them in many errors and omissions. Also, do not follow their intsructions on high EMD deposits, keep them as low as possible.
.
When has a broker told any of you buyers that the market is in a downward trend and to wait it out for even a paltry few months. The Mantra is always buy now . Any brokers out there who have told their buyers that the market, particulalry in SoCal (Not the Inland Empiore) is still artificialy high. It is irrelevant the prices five years ago.
Brokers will manipulate and spin, all part of the used car sales mentality, particularly in OC/LA. Back in the day there were your mom and pop Brokers, part of the community, who were a different breed. Bottom line for Buyers is due dilligence at evey step and refuse to be manipulated by RE type s on the thought process. I have met a few sweetheart female agents in the SoBay who are honest, one at Remax Palos Verdes. Granted, I'm a cash buyer at this point and have quite a bit of experience under my belt. When interests rates soon tick up even one point, it's great for me, prices further down. L.A. is a hard town, probably more decent type of RE types elsewhere. If you are a first time buyer and need financing, perhaps the time to buy is now, but do not be pushed around or manipulated and be ready for a further decline in value of the house you buy and drive a hard bargain .. never pay close to asking price in this market.
Have you been injured at work? Do you feel like you have no one to turn to or are fearful for the time and money you are losing? Let the attorneys at Workers' Compensation, LLC save the day by protecting your rights! We specialize on representing those who have been injured on the job and deserve prompt medical treatment and compensation for their lost wages.http://www.compmanwc.com/