It’s natural to want to save money when you’re making a purchase as large as a home. You want to buy the best home in the best neighborhood at the best price, and you may think the only way to accomplish your goals is to look for bargains. So instead of hiring a real estate agent, you scour the market for FSBOs, short sales, foreclosures, or homes that have been on the Internet too long.
While you’re bargain-hunting, here are five things you should keep in mind:
Lowballing sellers doesn’t work.
This sense of entitlement — that homes should only be sold at a profit – may cause them to overprice their homes or be less willing to negotiate. You’ll feel the same way when it comes time for you to sell your home, so make your offer reasonably and respectfully. Show the comparables that led you to make the offer. Be open to compromise.
Other buyers are getting professional help.
Ninety percent of buyers use a real estate agent while you’re spinning your wheels driving around neighborhoods and calling FSBO sellers who aren’t home to take your call. Soon, you’ll notice that the homes you’re watching are going under contract with other buyers.
True bargains are rare.
Sometimes a distressed home will impact the prices of the other homes because they typically sell at a discount of 17 percent, according to the National Association of Realtors. The other sellers may discount their homes somewhat, but if they’re not in distress, don’t expect them to negotiate as if they are. A bank foreclosure or bank-approved short sale could take months to close.
If a home has been on the market for a long time without a price reduction, there’s usually a good reason. You have an unmotivated, unrealistic, or upside-down seller, any of which could waste your time without resulting in a purchase. Move on to a deal that you can actually make.
The home needs work.
Sometimes a home will be marketed “as is,” which suggests that it needs a lot of work. Or, a home may be well maintained, but it’s so out of date it looks like a vintage sit-com set. You could be looking at a money pit.
Are you willing to perform the work or pay someone else to do the work? Before you buy, get a home inspection and then get bids from contractors who can help you bring the home up to today’s standards. If the purchase price and repairs come to approximately the same price as an updated home in the same area, then go for it.
It’s not a bargain if it doesn’t suit your needs.
A home is a good buy only if it suits your family’s needs for space, features, comfort, and function. If you buy a home without enough bedrooms or baths, you’ll pay more in transaction costs to sell the home and buy another that’s more suitable. Choose wisely in the first place because it takes time to build equity. Your home should meet your needs for a long time.