Buyers get tough as pendulum swings - Increase in inventory gives buyers leverage to negotiate terms.

 

HONOLULU ADVERTISER   July 30, 2006

BY LISA SCONTRAS

Custom Publishing Group

 

This week’s announcement by the National Association of Realtors of the official shift to a buyer’s market in real estate around the country signifies that sellers no longer have the negotiating advantage.

 

“Look for properties that have been on the market more than 160 days. These sellers may be tired of waiting to sell, may be more motivated or may have to sell within a specific time period and may be willing to negotiate more on price and terms.”

 

 

NAR’s announcement — which comes after modest home sales in June, together with existing inventories that continue to pile up — has prompted Realtors at Prudential Locations LLC to come up with the following homebuying do’s and don’ts to help home buyers take the best advantage of this recent shift in the market.

If you are currently shopping for a new home, you will likely find that there are more houses on the market today than there have been in the previous five years — twice as many on Oahu as there were last year. Today’s market conditions offer a unique opportunity to buyers. But it takes more than a plentiful supply to make sure you are successful.

Some of the standard rules still apply: Do get prequalified before you start shopping. Don’t make any large purchases — buy a new car or take on any new debt before you close on your loan. In addition, there are some new rules that apply in today’s post-boom environment.

Kelly Mitchell of Prudential Locations recommends that buyers look specifically at a home’s “days on the market.”

“Do look for properties that have been on the market more than 160 days,” says Mitchell. “These sellers may be tired of waiting to sell, may be more motivated or may have to sell within a specific time period and may be willing to negotiate more on price and terms.”

Make offers on properties you like even if they are already in escrow with another buyer. Since most sellers don’t want to be faced with re-marketing their property, they may agree to more attractive terms and a lower sales price on a back-up offer.

When there are more sellers than buyers, use the negotiating leverage to your advantage. Your Realtor can help you put together an offer that takes advantage of combinations of price and terms. Don’t like the condition of the appliances? Maybe you can include new ones — add it to your offer.

Likewise, even though interest rates are slowly rising, it’s a good time to play hard-ball when shopping for a loan. A good Realtor can be a wealth of information regarding financing direction.

Prudential agent Shannon Smith suggests buyers stay away from interest-only loans, especially if that is the only way you can afford to buy the home.

“You have to understand that at some point — if you are staying in the property long-term — you are going to have to refinance and the payments are going to go up,” says Smith. “If you cannot afford the payments after they go up, then it may not be the best option for you. A better choice may be to pre-qualify for a standard conventional loan.”

It’s a good idea, according to both Mitchell and Smith, to shop around for the best loan — comparing interest rates and lenders. Because there are different types of lenders who specialize in different types of loans, ask your Realtor for recommendations. Your circumstances — whether you’re buying leasehold or fee simple, or if you have bad credit scores — may determine which lenders they recommend you consider.

Smith suggests you ask for a good faith estimate from each lender you talk to, and compare each of the proposed fees.

“I’m often surprised at how drastically different the fees can be from lender to lender,” says Smith. “I’ve seen lenders fees vary as much as $1,900.”

“Don’t hesitate to ask questions,” adds Mitchell. “It’s important that if you see a potential defect in the home, or any red flag, that you ask your Realtor about it. They can give you advice on who to call — a home inspector, electrician or plumber, for example.”

One of the most valuable services, according to Smith, won’t cost the buyer anything. That is the use of a buyer’s Realtor.

“At the top of your do’s list, should be use a Realtor — it’s free,” she says. “Since it’s the seller who pays the Realtor commission, it’s in your best interest as a buyer to always have a Realtor representing you.

 

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