How to Take Advantage of the Buyer's Market
How to Take Advantage of the Buyer's Market
There's no doubt in anyone's mind that we're currently in a buyer's market for real estate. It has been a buyer's market for 3-4 years now and looks like it will continue at least until some time next year.
So what do you need to know and do to take advantage of this?
First you need to determine if it makes sense for you to purchase at this time.
If you are purchasing property for your personal use, whether a primary residence or vacation/second home due to a relocation or similar reason, I could see that it would make sense if you are in a financial position to do so.
If you are purchasing for investment purposes only and are in a financial position to do so and understand that you are looking at a long-term investment rather than a "fast money" scheme - I could also see that it would make sense for you to do so.
Once you've determined that you do want to buy now, you need to address one of the most important steps in being prepared to take advantage of this buyer's market: getting the financing for your purchase worked out. In my experience, the best deals will require that you have either a preapproval letter for a loan or proof of funds for a cash purchase and in many cases they will be required with any offer you submit.
The most fatal error for buyers in this market is not being prepared well enough to act quickly when they find the right property or a great deal.
Let me tell you about 2 of my clients' experiences this last month to emphasize this point.
In the first case I had a client come down from Canada looking for a great deal on a condo with a good waterview either of Tampa Bay or the Gulf. I found the perfect deal for him and emailed him the listing within a few days of the condo coming on the market. He came down the following weekend and was very excited about the condo and asked me to call the seller's realtor the next morning about putting in an offer. When I called I found out that it had just gone under contract and in the 7 days it was on the market had several offers submitted on it.
There really was not much we could have done since my client did have to come down here to see it, but if it hadn't already gone under contract he would still have had 2 barriers that would have likely prevented him from getting this deal. The first is not having his financing fully arranged. The second was not recognizing how good a deal it already was - he wanted to try to get it for much lower than it was listed for. I'll go into that in a minute.
The second case was a client who had been looking for months for the perfect house and then I found one at a great price. I emailed it to her right away and after we talked I called the agent to clarify if it needed flood insurance. I got the info the next day (a Monday) and contacted my client and we arranged to see it Tuesday after work. It was everything she was looking for and in her price range. I called the agent and she said they already had 2 offers in (after only being on the market for 3 days) but that we didn't have to rush to get the offer in because the owner was relocating for a job and wouldn't have confirmation on the job until Thursday.
We put in a full price offer the next evening with a large deposit and 40% downpayment. My client had been wondering if we should see if we could get it lower but I told her that it was already priced extremely well and that if we were competing against other offers her only chance would be to make the strongest offer possible.
I won't go into the gory details but it ended up coming down to 2 offers (my client's and one other) and the realtor said that they were so close that it would probably end up being a coin toss as to which one was chosen. She felt ours was a little stronger (because the other offer was with a VA loan). Unfortunately the sellers chose the other offer and even their realtor couldn't understand it - they said they chose it because it came in first. Needless to say, both my client and I were pretty frustrated about the outcome. We did finally get something and beat out several others to get it (email me if you want the details on how we did it).
I bring these examples up because a lot of people have false information that because it's a buyer's market sellers have to negotiate down,or that properties don't sell quickly and that you should take your time. Actually that is true sometimes BUT not for great properties that are priced well or for ones that are a great deal.
Let me summarize some key points if you want to make the most of the buyer's market:
If you don't recognize an exceptional deal, you will never get one.
If you don't act quickly and give a strong offer when you find an exceptional deal, you will most likely lose it.
If you aren't fully prepared with your financing lined up, including preapproval or proof of funds letters, you won't be able to act quickly enough on an exceptional deal.
There are exceptions to this but in my recent experiences I've found that these hold true more often than not.
Lastly is the point I brought up when I described what happened with my Canadian client. It also goes along with the second bulleted point above.
When you find an exceptional deal, don't lose it because you think you can get it for a lot less since the sellers "are probably desperate" or "they'll probably take less because of how the real estate market is doing". There are times when you can negotiate a seller or bank down on a property and times when it is already priced so well that it will be snatched up very quickly at the listed price. You either need to know enough to recognize this or listen to your realtor when they tell you this (especially when they provide enough information to show this is the case).
Hopefully this will provide you with a foundation on which you can proceed successfully in your real estate purchase so that you don't let the right time to buy slip away.
Copyright 2010 Ron Nedd
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