Your Realtor® is arguably the most important person in your home-buying experience. You need to find one who regularly tracks the local market and can explain whether an area is declining or on the rise.
Realtors with their thumb on the pulse of the market are able to spot minor changes long before others see them coming. They can provide a view of the overall market or a detailed view of a specific neighborhood or zip code.
To start the hunt for the perfect home, find a Realtor® who has the most knowledge about the market area where you plan to live.
If you planned to purchase a home in the Washington, DC metro area, would you rely on market information from your Realtor® cousin in New York?
He/she might be able to provide negotiating techniques common in his market, but will that do you any good in here in the DC area?
Who to Hire (not a decision to take lightly)
You want to hire a
- full‐time Realtor® who has made a career out of helping people buy and sell their homes
- Look for one who will take the time to determine your specific requirements. Most realtors only ask their clients about price range, square footage or the number of bedrooms and bathrooms desired. These structural details may assist them in searching for a property, but they don’t address the reason people fall in love with their homes
- Your Realtor® should understand the seasonal tendencies of the housing market
- They should also understand how the current economy and interest rates are affecting home values at different price points. This can alter your decisions of when to buy, what to buy, and how much to offer
- When you purchase a home, you are creating a lifestyle. An experienced Realtor® will be a great listener and ask great questions like: what made you choose where you currently live and whether those things are still important to you. Another crucial question is what will you miss most about your present home once you leave? The answers to these questions will provide the Realtor® with a good understanding of exactly what you are looking for
This analysis reveals many aspects you may not have thought about. It can reveal:
- Desirable school districts
- Proximity to bus lines and retail establishments that might not have been discussed previously
This information enables your Realtor® to customize their search to locate the perfect home for you and your family.
Riding the Rollercoaster with You
Buying a home can be an emotional roller coaster! It is important to have the entire process explained from start to finish before you begin your search. If you know what to expect, the wait doesn’t seem as long, and you’ll encounter much less stress. If a Realtor® is not willing to spend time up-front to listen and understand your needs, find someone else who will!
- A good Realtor® will provide a market analysis and set an expectation of how much you will need to pay to get the amenities important to you. By doing this up‐front, planning before becoming emotionally attached to a home will enable you to make more logical decisions and avoid overpaying when you find the perfect home
Realtors who show you homes beyond your price range do you a disservice. Once you are shown a home out of your price range, and fall in love with it, then finding a home with similar amenities in your price range will be diffcult. It’s like love at first sight. Nothing after it will live up to the expectations.
Seller’s & Buyer’s Markets
Spending time to review market graphs and charts before your search begins will help you understand whether the area is a Seller’s Market. It will also help with determining where properties sell quickly, or if a Buyer’s Market, where few homes are selling. This will help you decide whether it is the right time to buy.
There are questions you should consider as you get started.
- How much of your paycheck would you be willing to commit to a house payment?
- How much are you paying now?
- How many bedrooms do you need and how would you like them positioned?
- Do you want to live on one side of the freeway vs. the other?
- What part of the city are you most interested in?
In a Seller’s market with a significant shortage of available homes, you may need to offer more than the asking price.
This can lead to an auction‐like bidding war for a desirable home.
Knowing how much you would be willing to pay before you enter into a situation like this is highly advisable. Knowing the price that similar homes in the area have sold for and how long it took them to sell will provide you with a good understanding of each specific neighborhood.
In a Buyer’s market, it is important to know if the home has been on the market for a long time and whether there have been recent price reductions.
- Often, sellers will overprice their home, so it sits unsold for several months. This causes potential buyers to question whether something is wrong with the property
- As a local expert, your Realtor® will be able to help you determine when the last price reduction occurred
- They can find out why it occurred and how close your offer should be to the asking price in order to be considered
If your Realtor® does not know their local market, then you may fall into the trap of “Bidding Blind.”
- What price should you offer when you bid on a home?
- Is the seller’s asking price too high, or is it a great deal at the current price?
If you don’t have current information about how many similar homes are available and the price at which they are selling, you could easily overpay for your home or lose it to another buyer because your offer was too low.
Good deals don’t last long in any market. You’ll want to have the data readily available to help you make well‐informed decisions
When you have a good understanding of the market, your Realtor® can help you navigate past the over‐priced homes and zero in on the great deals.
As you view over time, you will begin to recognize which homes are good values and which are over‐priced. The homes you view can usually be placed in one of four categories:
Clearly Over‐priced:
Every seller wants the most money they can get for their home, and realtors know this. If several realtors are competing for the listing, an easy way to win the job is to o er to list the home for more than it is worth. Unfortunately, this is done far too often and many homes are priced 10‐20% over their true value.
This is not in the seller’s best interest, because the market is seldom fooled. Over‐pricing a home will cause the property to languish on the market for months or years, causing the seller to chase the market downward. This strategy relies on buyers who have not done their research and unknowingly purchase the over‐priced home. Buyers BEWARE!
Somewhat Over‐priced:
Believe it or not, about 75% of the homes on the market are 5‐10% overpriced! These homes stay on the market longer than they should for two reasons;
- either the seller believes their home is really worth this much, despite what the market has
indicated - OR the seller has left room in their price for negotiation
Either way, this strategy will cost them unnecessary time, energy, and stress.
Countering back and forth between you and seller can be exhausting, and you never know whether the person at the other end of the negotiation is about to give in or give up!
You could spend weeks negotiating on a home only to lose it
Meanwhile, the perfect home may have been listed and sold while you were negotiating with an unrealistic seller.
The best advice is to review the numbers, make an o er, and determine from the seller’s initial response whether or not they are realistic. If not, move on!
Priced Correctly at Market Value
Logical sellers understand that real estate is subject to the law of supply and demand. These sellers price their homes at a realistic value based on a thorough analysis of other homes that have sold, are under contract, or currently available for sale. These competitively priced homes usually sell in a reasonable time and very close to the asking price. This is the perfect situation for you, especially first‐time buyers, because the emotional stress and bantering are not necessary.
By the time most buyers have viewed a few homes, they have a pretty good understanding of value. To ensure that you don’t become emotionally attached to an over‐priced home, preview those that seem to be priced competitively before looking at those that seem to be over‐priced.
Priced Below Fair Market Value
Some sellers are very motivated and have compelling reasons to sell quickly. Whatever is driving the need to sell is usually more important than getting a high price for their home. Significantly under‐pricing a home can attract multiple ouyers in a matter of hours, and the home will usually sell very quickly.
Often, a “bidding war” ensues between interested buyers. The seller may ask for the “highest and best” offer from each of the interested parties. Since you have no idea how much the other buyers will offer, it is hard to decide how much to offer.
In situations like this, it is very important to have a Realtor® who knows the market, can guide you on how much to offer, and keep you from over‐paying like many buyers do at auctions. Although it is emotionally difficult, make your best educated offer and hope for the best.
Paying too much can turn your dream home into a nightmare. Utilizing the services of an experienced buyer’s agent can keep you from overpaying for a home, losing the home you want to another buyer, or worse yet, buying the wrong home for your needs.
Take the time to find a qualified Realtor® who is honest, ethical, and knows the market where you want to live. This will help take the fear out of the equation so that you can make an educated purchase on a great home. Shopping for a home can be exhilarating when you have a professional Realtor® to guide you through the home‐buying process
Next month, your home-buying education continues when we cover looking for your new home.
