Be prepared – If you don’t already have one, get a pre-approval letter from a local lender. Why local? Realtors are familiar with lenders in their market and know whether or not they can get the deal done.
Gather your information – Ask your realtor to prepare a Buyer’s Market Analysis for you. This will give you a snapshot of comparable homes and an idea of what they’ve been selling for in the last six months.
Make sure you understand your local market –particularly if you are coming from out of state. Ask your realtor what the list price to sales price ratio is in your market. For the last several years in Bryan/College Station, on average, most homes sold for between 97-100% of list price. That number crept slightly downward in the last 12 months to 96-100% of list price.
Knowing the list price/sales price ratio will help you understand the range that you can expect the seller to agree to.
National statistics don’t always reflect your local market. There are other factors that can make your local market very different from the national market. For example, properties close to Texas A&M University, that are suitable for student housing, are in great demand. Generally they don’t last on the market very long and if priced aggressively, sell within days of coming on the market. If you are in the market for one of these homes, you need to act quickly and expect to pay asking price or higher.
Days on market – if the house has only been on the market a very short time – don’t expect the seller to entertain a low offer. Don’t assume because a house has been on the market a long time that the seller is desperate. The sluggish economy for the last few years has caused longer days on market.
There are many factors that a seller considers besides the price you are offering.
Cash offer versus one requiring financing – a cash deal is usually a quick transaction. A cash transaction can close within days in comparison to one subject to financing which usually takes 30 to 45 days to close. Cash deals have fewer requirements. A lender will always require a survey and appraisal for a financed transaction. These take time to acquire and add to closing costs. Since there is no lender involved in a cash transaction neither a survey nor appraisal is required saving time and money for both buyer and seller.
Closing Date – Most transactions close within 30-45 days for a transaction requiring financing. A seller may need this time to get moved so asking for a quicker closing might be an issue. On the other hand if you are asking for a closing date two to three months out, this may also be problematic to a seller. They’ll have added expenses during that time such as continuing to make house payments, maintaining the lawn, utilities, etc. In addition, a lot can happen in two months that could negatively affect the transaction.
Closing costs – if you need the seller to help you with closing costs, you need to be prepared to come closer to their asking price.
Amount of earnest money – You need to have some skin in the game. The amount of earnest money you put up indicates to the seller your seriousness. Be prepared to put up more earnest money if you are asking the seller for a closing date beyond 45 days or if you have other contingencies.
Contingency to sell another home - If you are looking to buy a home and you need to sell your home first – get your home on the market and under contract before making offers on a new home! Asking a seller to consider an offer that is contingent upon the sale of your home is inherently a weaker offer. If your current home is not on the market, the contingency offer is an extremely weak one.
Creating a Win-Win situation - Real estate transactions can be very emotional. Because of this, it is important that everyone in the transaction feels like he/she has won something through the negotiations.