|4 tips for buying a house in a buyer's market
Villena counsels buyers to avoid the temptation to
toss out lowball offers, because sellers won't negotiate if they
"You have to be able to defend that offer as much
as the seller has to be able to defend the asking price," he says.
"If you're not making a full-price offer, it's not enough to pull
a number out of the air. You should be able to show that this neighborhood
has 20 comparable homes for sale, and, although I like your property,
it's priced 6 percent above the other properties. That gives you
a better footing for establishing an objective and reasonable negotiation."
Don't just negotiate with the seller. "Most people think that only sellers pay commissions," Villena says. "They think that buyers are being serviced for free. Most people are not yet aware that there is a commission component reserved for the buyer's agent. And that, too, just like the seller's commission, is negotiable."
How so? Some buyer's agents are willing to rebate
a portion of their commission back to the buyer at closing. For
a number of real estate brokerages, such as Homekeys, BuySide
Realty and HouseRebate,
buyer rebates are the focus of the business plan. Expect to make
your own appointments to view houses and to drive yourself there
if you use one of these brokerages.
Realtors associations in some states have persuaded
legislatures to ban commission rebates to buyers.
You're shopping for a house, not for a Caribbean cruise or a car
lease. Recently The New York Times reported on a condo seller who
was offering to give the buyer a year's use of a leased Mercedes-Benz
Razzi says you'll find all sorts of gimmicky incentives
from condo sellers. They offer flat-screen TVs or weekends at vacation
homes, or more creative inducements. "That has nothing to do with
the transaction at hand," Razzi says. If there's an incentive, make
sure it has something to do with the dwelling -- upgraded countertops,
decorating allowances, payment of mortgage closing costs, that sort
of thing. "If they're willing to subsidize it with a $500 TV, ask
for $500 off the asking price," she says.
There's another gimmick to avoid: what O'Connor calls "magic loans." This is the time to avoid mortgages such as pay-option ARMs and interest-only loans, she says. If you can't afford it with a more mainstream loan, such as a 30-year fixed or a 5/1 ARM, you can't afford it. Not in this market, where house values could drop and mortgage rates are almost sure to rise.