HOW TO SAVE THOUSANDS OF DOLLARS WHEN YOU BUY A HOME
If you’re like most homebuyers, you have two primary considerations in mind when you start looking for a home. First, you want to find a home that perfectly meets your needs and desires, and secondly, you want to purchase this home for the lowest possible price.
When you analyze those successful homebuyers who have been able to purchase the home they want for thousands of dollars below a seller’s asking price, some common denominators emerge. Although your agent's negotiating skills are important, there are three additional key factors that must come into play long before you ever submit an offer.
THESE STEPS WILL HELP YOU SAVE THOUSANDS WHEN YOU BUY A HOME
1. Make sure you know what you want.
As simple as this sounds, many homebuyers don't have a firm idea in their heads before they go out searching for a home. In fact, when you go shopping for a place to live, there are actually two homes competing for your attention: the one that meets your needs, and the one that fulfills your desires. Obviously, your goal is to find one home that does both. But in the real world, this situation doesn't always occur. When you're looking at homes, you'll find that you fall in love with more then one home for entirely different reasons. Is it better to buy the 4-bedroom home with room for your family to grow, or the one with the big eat-in kitchen that romances you with thoughts of big weekend family brunches? What's more important: a big backyard, or proximity to your child's school?
Far too often people buy a home for the wrong reasons, and then regret their decision when the home doesn't meet their needs.
2. Don't shop with stars in your eyes: satisfy your needs first.
If you're lucky, you'll find a home that does this and also fulfills your desires. The important thing is to understand the difference before you get caught up in the excitement of looking.
3. Find out if your agent offers a "Buyer Profile System" or "House-hunting Service".
These services take the guesswork out of finding just the right home that matches your needs. This type of program will cross-match your criteria with ALL available homes on the market and supply you with printed information on an on-going basis. A program like this helps homeowners take off their rose-colored glasses and affordably move into the home of their dreams.
To help you develop your homebuying strategy, use this form:
What do I absolutely NEED in my next home:
What would I absolutely LOVE in my next home:
How Sellers Set Their Asking Price
For you to understand how much to offer for a home you’re interested in, it’s important for you to know how sellers price their homes. We've presented this information before from the seller's point of view, but it makes sense to repeat it here to help you understand what motivates the price sellers ask for.
Here are 4 common strategies you’ll start to recognize when you begin to view homes:
1. Clearly Overpriced.
Every seller wants to realize the most amount of money they can for their home, and real estate agents know this. If more than one agent is competing for your listing, an easy way to win the battle is to overinflate the value of your home. This is done far too often, with many homes that are priced 10-20% over their true market value. This is not in the seller's best interest, because in most cases the market won't be fooled. As a result, the home could languish on the market for months. This creates problems for the seller in that:
The home is likely to be labeled as a "troubled" house by other agents, leading to a lower than fair market price when an offer is finally made
The sellers have been greatly inconvenienced with having to constantly have their home in "showing" condition... for nothing. These homes often expire off the market, forcing sellers to go through the listing process all over again.
Be wary of homes that have been on the market for a long time. This occurs most often because the seller's asking price is too high.
2. Somewhat Overpriced.
About 3/4 of the homes on the market are 5-10% overpriced. These homes will also sit on the market longer than they should. There is usually one of two factors at play here: either the seller believes that their home is really worth this much despite what the market has indicated (afterall, there's a lot of emotion caught up in this issue), OR they've left some room for negotiating.
3. Priced Correctly at Market Value.
Some sellers understand that real estate is part of the capitalistic system of supply and demand and will carefully and realistically price their homes based on a thorough analysis of other homes on the market. These competitively priced homes usually sell within a reasonable time-frame and very close to the asking price.
4. Priced Below the Fair Market Value.
Some sellers are motivated by a quick sale. These homes attract multiple offers and sell fast - usually in a few days - at, or above, the asking price.
Discuss these sales strategies with your agent. Together, you'll be able to use this information to help you structure an offer that will motivate the seller and potentially save yourself a lot of money.
Inspector's Top 10
Know how extensive repairs will be before you take them on.
The House Has Poor Drainage.
This is the most common problem found by home inspectors. To improve drainage, you may have to install a new system of roof gutters and downspouts or have the lot re-graded to better channel water away from the house.
The House Has Faulty Wiring.
An insufficient or out-of-date electrical system is a common problem, especially in older homes. This is a potentially hazardous defect and not to be taken lightly. You may have to replace the entire electrical system, or at least part of it, to bring this home up to code or to make it safe.
The Roof Leaks.
If the roof has water damage, it may be caused by old or damaged shingles, or improper flashing. It's cheap and relatively easy to repair shingles and small amounts of flashing, but if the roof is old, you face a much larger expense to replace the whole thing.
The House Has An Unsafe Heating System.
An older heating system or one that has been poorly maintained can be a serious health and safety hazard. You may have to repair or replace the old furnace. This is a major expense, but new furnaces are more energy-efficient, which will probably save you money down the line. If your heating system is anything but electrical, install carbon monoxide detectors in a couple of locations in the house.
The Whole House Has Been Poorly Maintained.
Examples of poor maintenance include cracked or peeling paint, crumbling masonry, broken fixtures or shoddy wiring or plumbing. You can easily repaint a wall, replace a fixture or repair a brick wall, but makeshift electrical or plumbing situations are serious and potentially dangerous problems. Replace any such wires or pipes.
The House Has Minor Structural Damage.
Minor structural damage means the house is not likely to fall down, but you should deal with the problem before it becomes more serious. Such damage is usually caused by water seepage into the foundation, floor joist, rafters or window and door headers. First you need to fix the cause of the problem (a leaky roof, for example), then repair or replace any damaged pieces. The more extensive the damage, the more expensive it will be to repair.
The House Has Plumbing Problems.
The most common plumbing defects include old or incompatible piping materials and faulty fixtures or waste lines. These may require simple repairs, such as replacing a fixture, or more expensive measures, such as replacing the plumbing itself.
The House's Exterior Lets In Water and Air Around Windows and Doors.
This usually does not indicate a structural problem, rather poor caulking and weather stripping that require relatively simple and inexpensive repairs.
The House Is Inadequately Ventilated.
Poor ventilation can result in too much moisture that wreaks havoc on interior walls and structural elements. It can also cause allergic reactions. Install ventilation fans in every bathroom or regularly open windows in your home. To repair damage caused by poor ventilation, you may only have to replace drywall and other inexpensive pieces. If you have to replace a structural element, it will be more expensive.
The House Has An Environmental Hazard.
Environmental problems are a new and growing area of home defects. They include lead-based paint (common in homes built before 1978), asbestos, formaldehyde, contaminated drinking water, radon and leaking underground oil tanks. You usually need to arrange a special inspection to determine environmental problems, and they're usually expensive to fix. For example, it costs $1,000 to install a radon-ventilation system, and about $6,000 to remove a leaking oil tank.