Housing prices across the country continue to slump, and the forecast for the immediate future is gloomy. Gloomy for sellers, that is. In many markets, the supply of homes is now greater than the demand to buy them, so sellers can't be terribly choosy. You, the buyer, have greater leverage than usual to name your terms and make them stick. Welcome to the elusive but profitable condition known as a buyer's market.
Individual markets vary, so look out for signs that yours is slow, such as persistently unsold homes in your neighborhood and signs trumpeting price reductions. Chances are, if you're looking to buy -- particularly if your purchase isn't contingent on selling your current home -- you're in the driver's seat right now.
Here are 10 tips for making the most of the current buyer's market.
•1. Take a focused look. In a slow market, you don't have to jump on the first property you like, but don't let a gem get away-you're not the only one looking, and the more desirable homes go quickly. Look at as many as you can; you're likely to notice which ones have lingered on the market and therefore might be open to a price reduction.
•2. Investigate the foreclosure market. The housing market downturn, along with the related collapse of the subprime mortgage market, has caused foreclosures to spike nationwide. Foreclosed homes now sit empty and can be had at bargain prices. But beware ads and Web sites that promote investing in foreclosed properties; these can be shady. Also, remember that local agencies specializing in foreclosed properties typically represent the interests of the banks trying to unload them. You should consult an exclusive buyer agent who represents your interests only to help you navigate the local foreclosure market.
•3. Get a steal on new construction. Builders are notoriously unwilling to budge on price, but not in a market like this. Seek out new developments with lots of empty homes for the best bargaining power. Find out about homebuilder incentives and financing programs that put cash in your pocket.
•4. Ask for free upgrades or repairs. Don't be shy. Desperate builders can throw in substantial upgrades at very little cost to them. On existing homes, sellers may be willing to make major repairs (like replacing a leaky roof) to secure the sale.
•5. Offer 15 percent below asking price. First offers are usually slightly below the seller's asking price, but in a buyer's market, you can test a substantial price cut. Understand, however, that if the price has already been reduced, a deeper cut may not fly.
•6. Play the time card to your advantage. In your offer, stipulate a small time frame for the seller's response -- say, 24 hours -- to encourage acceptance, but demand ample time to conduct inspections, get the contract approved by an attorney, and so on.
•7. Ask for a written warranty. A year of coverage on appliances, structural repairs, and so on can prove extremely valuable.
•8. Negotiate your closing date. Maybe a couple months of breathing room would help you -- you need more time to scrape together your down payment, you'd be better off moving after the kids finish the school year, etc. To seal the deal, a motivated seller may be willing to wait until you're ready to close.
•9. Reject the counteroffer. A buyer's market is a good time to test where the true bottom line is because you're less likely to lose the sale. If the risk won't kill you, be firm on your offer and see what happens. (But don't insult the seller -- that benefits no one.)
•10. Drive a hard bargain with your lender. House price isn't the only thing that's negotiable. In a slow market, lenders will bend for your business. Involve two or three in the negotiating process and ask for favorable terms: lower closing costs, lower interest rate, lender-paid private mortgage insurance, etc. The best deal wins.
•11. Most importantly of all, get under contract by April 30, 2010. A sizeable income tax rebate may be awaiting you. Contact a reputable real estate now agent to have all your questions answered and have the best deal possible negotiated on your dream home!