As home prices continue to rise, many of the homes that previously showed a negative value are starting to get to the point where the value is equal or more than what is owed. Sellers finally can see their way to sell their home without taking a loss. There are some things to be cautious about though.
Even if the home”s value is equal to what is owed, there are expenses in the sales process. Fees such as title, escrow, transfer tax, disclosures and the Realtors commission are just a few. Often, the seller”s expectation is much greater than the market will allow.
Bridging the price gap between home buyers and sellers can be a challenge in today”s market. Sellers, many of whom have a hard time accepting that their home has lost value, often expect to sell for more than buyers are willing to pay.
Buyers, on the other hand, are concerned that home prices may not continue to increase so they are wanting to make sure that they don”t overpay.
There are exceptions to the rule. Desirable homes in the best locations sometimes sell for over the asking price, particularly if there isn”t much inventory of similar homes on the market. Some foreclosure properties at bargain prices are attracting multiple offers. Prices are rising faster in some areas of Lake County than others. At this time locally it is still a buyers” market.
There”s not much that can be done to convince an unrealistic seller that they should accept an offer at market price. Many sellers will not budge past a certain price that they have in mind, especially if they own the home outright and can wait out the market or if they have to pay off what is owed and can”t sell it for less. Some sellers may have bought at the peak of the market and can”t bear the thought that they would be losing money. In other words, they won”t sell unless they get their price.
When making an offer on a listing that is overpriced, find out as much as possible about the sellers” motivation to see if there is any room for flexibility. Save your efforts for listings where the sellers are motivated. That is, they don”t just want to sell — they need to sell.
Some sellers want to test the waters at a price that”s higher than the market will support. They usually feel that someone will appreciate the added value their home offers and pay more for it. However, these sellers will often negotiate with a legitimate buyer who offers a price that is less than the list price.
For buyers to be put in the best negotiating position, make sure that the financing is in line by connecting up with a lender. Lenders can see how much house buyers can afford to buy. This way a buyer isn”t looking at more than they can afford or may be able to buy more than they think they can.
Being pre-approved for a loan will put a buyer in a much greater advantage than those who are not. This involves making a formal loan application, having a credit check as well as verifying if funds for the down payment and closing costs are available, and validating income and employment. Lenders often want to know that there is enough surplus cash to make house payments (mortgage, property taxes and insurance) for two to three months.
Buyers who make an initial low offer and who aren”t in competition should make as clean an offer as possible. This means omitting anything that”s not necessary. However, they should include contingencies for loan and appraisal approval and an inspection contingency.
When making an offer it is wise to include a pre-approval letter; however, if borrowers are approved for a higher price than they are offering, lenders will amend the letter to reflect the price that is actually being offered.
Don”t be afraid to negotiate. It may take several rounds of counteroffering back and forth to finally reach a mutually acceptable price.
Ray Perry is the 2013 Realtor of the Year for Lake County and works for CPS Country Air Properties. He can be reached at 277-8000.
