How to buy an overpriced home
01/23/2014 5:26 PM
01/23/2014 5:27 PM
With the economy on the upswing, most homebuyers aren’t in the catbird seat of a few years ago. It seems like ancient history when buyers could practically dictate terms to sellers. Now the tables are turned in many, though not all, areas.
“Sellers clearly know they’re in a much stronger position now,” says Fred Meyer, a veteran real estate broker who sells property around Harvard University.
One manifestation of seller strength is that the owners of special properties, including homes with stunning views or special historical significance, are willing to wait it out rather than compromise on price.
As a rule, and even in strong sellers’ markets, homeowners who list their property for an unreasonably high price are eventually punished for their greed.
“Even in a strong sellers’ market, that wait-and-see strategy only works for the owners of houses that are truly extraordinary in some way – such as for their architecture or unique setting. An overpriced house that’s not exceptional will just languish unsold until steep discounts are taken,” says Meyer.
Tips for negotiations
Do you love a home you believe to be overpriced? If so, these pointers could prove helpful as you seek to shape an offer:
Update yourself on local property values. The asking price isn’t always a reliable measure of a property’s value, says Eric Tyson, the co-author of “Homebuying for Dummies.” He suggests that buyers increase their own knowledge of neighborhood values.
Prior to offering a bid, Tyson says buyers should ask their agent to prepare a “comparative market analysis.” To do this, the agent should gather data on transactions that sold recently on homes in the immediate area.
Your evaluation of neighborhood sales should yield a general estimate of the value of a property that interests you. Then, if you’re opening with a low starting offer, Tyson encourages you to attach comparable sales data to support this.
Try to find out about the owners’ level of motivation to sell. Not everyone with property on the market wants to sell immediately, says Tom Early, a real estate broker and former president of the National Association of Exclusive Buyer Agents.
“(Some) sellers ... are really just testing the market to see if their excessive expectations can be met,” he says.
How can you find out what’s caused the sellers to put their place on the market? Often your agent can obtain answers by simply asking the sellers’ agent direct questions, according to Early.
How can you get less-than-eager sellers to bargain? One idea is to volunteer a late closing date in exchange for a price cut on the property.
Don’t be too hasty when responding to a seller’s counter offer. Apart from the exceptions, most sellers are eager to move promptly, particularly if their home has gone unsold for weeks or months. But that doesn’t necessarily mean they’ll let their property go without a struggle over price.
“Nowadays, in neighborhoods where real estate has yet to rebound, it’s not unusual for negotiations between buyers and sellers to go for several rounds before an agreement is reached. If you really want the house, it’s worth pursuing the process, so long as the sellers are bargaining earnestly,” Early says.
As Early notes, most sellers have their egos tied up in their property. That can cause them to make unreasonable counter offers, even when they have an urgent need to sell. Should you respond to such a challenge on their terms? Not necessarily, says Early. In fact, failing to answer immediately could be an effective way to cause them to become more realistic. He calls this tactic the “walk-away.”
Temporarily disappearing from negotiations won’t cause unmotivated sellers to yield on price. But it might prompt motivated sellers to take a serious second look at your latest offer.
What should you do if the owners of a home you love demand a price you know to be excessive and all attempts to negotiate seem futile? Early recommends that, hard though it is may be, you let go of the property and begin seeking another one immediately.
“Don’t fret about your ‘lost’ house. Even today, with the real estate recovery well underway, chances are you’ll find an even better house for a fair price,” Early says.
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