Many home sellers take their home off the market during winter as there’s a conception that sales are slow, and it will hurt the home’s chances to sell at a reasonable price if it sits on the market for months. There’s a flip side to this coin, though – homes that are on the market during the holiday season often have a better chance to sell. Sellers are more serious about selling, and buyers are more serious about buying, during the housing market “off season.” Consider these benefits if you’re thinking of buying or selling a home during the holidays:
Buyers and Sellers are More Serious
Because many homeowners and potential buyers view the holidays as the “off season” for buying or selling a home, the people who do buy or sell during this time of year are typically more serious. Buyers are ready to buy, and sellers are ready to sell. Sellers won’t have to worry about showing the home non-stop to people who are “just shopping” – everyone who looks at the home is usually a qualified buyer. And buyers can take comfort in the fact that sellers during this time of year are typically serious, and they may make a good deal.
Homes can Show Well During the Holidays
If you can keep your house clean, homes tend to show well during the holidays. Beautiful holiday decorations, the smell of home cooked meals or fresh baking – the sights and sounds of Christmas can heighten the emotional connection buyers make with a home. Since buying a home is partially an emotional experience, this increases your chances of making a sale or purchase.
Limited Supply Simplifies Housing Shopping
Many shoppers feel overwhelmed by the selection on the housing market, and some buyers succumb to pre-emptive buyers remorse – they’re worried there’s a better deal somewhere so they won’t pull the trigger. Limited inventory during the holidays makes it easier for buyers to narrow their sights and make the decision to buy. Depending on the condition of the local housing market, limited supply can be advantageous to the sellers, to the buyers or to both parties.
You’ve shopped around and you’ve found your dream home. It’s the perfect house in the neighborhood you want, and it’s within your price range. Once you’ve decided to buy your new home, it’s time to make an offer. What goes into making an offer, and what should you consider when you’re ready to make a purchase?
Purchase contracts vary.
Purchase contracts vary, sometimes significantly, from state to state. Even within a state, purchase contracts might vary from city to city, and depending on who you’re working with. Because there’s no standard, you’ll need to make sure you get the language you need in your purchase contract. It’s extremely important to work with an agent or lawyer with a good grasp of purchase contracts so you can use the right one for your area and make sure serves your interests.
Language in purchase contracts can vary.
Real estate laws and mandated seller disclosures change. These aren’t universal, hard-and-fast rules. For this reason, language in purchase contracts can vary from locale to locale, or even over time as laws and regulations change. Make sure your agent or lawyer is up-to-date on current real estate law so your contract contains the correct language. You might want to check the contract’s revision date, which is typically in the bottom corner of the document, to ensure it’s fairly recent.
A carelessly worded offer can kill your deal.
Before you even get to the purchase contract, make sure your offer contains the right language to ensure you don’t get rejected out of hand. A poorly-worded offer can create so much conflict up front that you never get to the purchase contract stage. Consult with your agent to find the right language for your offer, and read it through as if you were a potential seller to make sure there’s nothing offensive or off-putting in the offer language.
When you’re ready to buy, you want to make a good offer. You don’t want to make an offer that’s going to get you rejected out of hand – you want to make an offer that the sellers accept, or at least inspires them to make a counter-offer. What does a good offer need?
1. Make a realistic offering price.
First and foremost, make a realistic offering price when you make an offer. Don’t just pull a number out of the air. Likewise, don’t quote a significantly lower number to sellers just because you want to make a deal (unless the property is drastically overpriced in the first place). A good offer leaves some room for haggling, but doesn’t insult the seller by including a lowball offering price.
2. Include realistic financing terms.
Lending conditions play a big role in your financing terms. Don’t quote unrealistically short or tight financing terms – especially in the current economy – because you might not be able to meet them. If you are preapproved or prequalified, make sure the seller knows it. This tells the seller that you’re ready to buy the property and that you can likely obtain financing, which makes your deal more attractive than a deal where the buyer hasn’t done the groundwork yet.
3. Don’t forget property inspection clauses.
When you make an offer on a house, you typically don’t know everything about the property’s condition and status. You might be able to physically observe issues with the property, but a lot of issues aren’t visible to the average buyer. Make sure to include property inspection clauses that enable you to re-open negotiation after your inspector checks out the property. If you find issues you need to address, property inspection clauses enable you to potentially renegotiate with the sellers, or back out of the deal if there are serious issues.
Buying a home is about more than putting a roof over your head; it’s an investment for the future. To that end, you want a home that will appreciate in value, and one way of ensuring that is buying in a neighborhood that is growing or improving. It may not be obvious whether a neighborhood is improving or declining, but there are a few ways to check the status of your new area before you buy: check for proposed infrastructure changes or special tax assessments. These items can yield clues about the future of your new neighborhood, as well as the cost and value of your home.
Special Tax Assessments: More Than Just Money
Depending on where you buy, property taxes can consume a large portion of your budget. Predicting future property taxes relies on a many factors, but one thing that can be difficult to evaluate or anticipate is a special assessment. When you’re considering buying a new home, check with the local assessor’s office to see if any special assessments are planned. These assessments can tell you about more than just your property taxes, though. Special assessments for things like a new park or improvements to the local school can help raise your property value and make your property more attractive to parents. Read between the lines to determine if an assessment is going to add cash value or resale value to your home.
Look for Planned Infrastructure Changes
Local infrastructure says a lot about a neighborhood. When you’ve found your dream home, check with the local planning board and city hall to see what sort of infrastructure changes are planned for your new neighborhood. Some infrastructure changes can translate to an increase in value for you, while others may signal your home could become less desirable. For example, if the two-lane road in front of your dream home is about to widen to a four-lane road, you’ll have not only construction to deal with, but increased traffic. A home could be less desirable as a result. When you’re ready to buy, check with the local planning board to see what infrastructure changes are planned, and how they might affect your home.
If you’re buying in a buyer’s market, you might be able to negotiate escrow credits with the seller. If buyers have the advantage in the market, some sellers might be willing to offer escrow credits to ensure that a home sale goes through. One useful credit that sellers sometimes offer is to negotiate nonrecurring closing costs in escrow.
What are Nonrecurring Closing Costs?
Nonrecurring closing costs are one-time charges for generating your loan and buying your new home. These one-time costs might include: appraisal, credit report, title insurance, property inspections, or loan points. Closing costs on your home can range from 3% to 5% of your home’s total value, so these nonrecurring closing costs can add up to thousands of dollars.
When Do Sellers Pay Nonrecurring Closing Costs?
Sellers might be willing to negotiate a credit to pay nonrecurring closing costs in a buyer’s market, if sellers have had trouble making a deal or want to ensure the deal goes through. As a buyer, if the seller hasn’t offered to negotiate a credit for nonrecurring closing costs, it might still be acceptable for you to ask for this in negotiation. The only time you might want to avoid asking for an escrow credit for nonrecurring closing costs is in a multiple-offer situation, or if you’re buying in a seller’s market.
Price Reductions versus Credits
One common question about escrow credits is price reductions versus credits: why a credit, and when is a price reduction appropriate? Price reductions generally aren’t helpful if buyers are strapped for cash.
For example, if buyers have $50,000 to put down on a $250,000 home, that puts them at 20% down and reduces loan costs and insurance fees. However, if buyers also have to pay $10,000 in closing costs, that effectively puts them at $40,000 down payment, which means it only covers 16% of the loan. This can result in a loan at a higher interest rate, plus higher up front costs.
Reducing the cost of the home by $10,000 to $240,000 only reduces the 20% down payment to $48,000, which still means the buyers won’t have enough cash to cover closing costs and a 20% down payment. However, if the seller will cover the closing costs in escrow, the buyer has to come up with less cash up-front.
So you’ve found your dream home, made your offer and gotten a counteroffer back from the sellers. It isn’t the ideal scenario, but it’s better than being rejected out of hand. Realistically, you should expect a counteroffer and a couple of rounds of negotiation before you and the seller agree a deal. How, then, do you properly deal with a counteroffer?
Counteroffer to Negotiate Price
If you make an offer with a great price, you may never have to deal with a counteroffer over price. However, if the sellers want to get just that little bit more, or if your offering price wasn’t quite realistic, you’ll probably have to negotiate over price. When you’re discussing price, the seller is likely to come back with a number that’s somewhere between their original asking price and your offering price.
This is when you have to decide how much you want the home, and how much you want to stick to your price range. If you have some wiggle room in your budget, you may want to simply accept the seller’s counteroffer. However, if you really can’t go above a certain price range, respond to the counteroffer accordingly but be willing to accept it if you lose the house.
If you want to continue negotiating, come back with an offer higher than your original offer but lower than their counteroffer. If you and the seller simply can’t agree on a price, consider splitting the difference to meet in the middle if you really want the home.
Counteroffer to Fine Tune the Deal
In some cases, sellers may be perfectly happy with your offer price but make a counteroffer to fine tune the deal. For example, you might make an offer that says you want to close on escrow 30 days after the sellers accept your offer, but the sellers might need longer than that to relocate. Many of the points in fine-tuning a deal are negligible and easy to grant. However, if you’re on a tight deadline or the seller is asking something that you think is unreasonable, you might have to go back to the table or walk away from the deal.
The real estate market has been volatile in places across the United States since the current slump began in 2008. December continues to show slow progress in some parts of the country, and signs of life elsewhere. Are you looking to buy a home in an area of high supply and low demand, or is your real estate market more competitive? These tips can help you gauge supply and demand in a traditionally slow December market, and help you decide if it’s time to buy:
Check Local News Sources
The real estate market is one of the main sources of gauging the health of the economy, so many news sources focus on how the real estate market is doing on a monthly and quarterly basis. Consult local news sources, such as newspapers, local tv stations or local news websites to see what the real estate market is like in your area. Generally, the Southeast and a few other areas of the country are still seeing a residential market slump, but other parts of the country are recording more activity and a gradual return to pre-slump levels.
Determine How Long Local Properties are On the Market
The length of time that properties spend on the real estate market can give you a lot of information about the health of the market. In a good market, real estate may stay on the market for anywhere from 15 to 45 days. In a market slump, real estate may stay on the market for two to six months – or more. Find out what the average is for real estate staying on the market in your area to gauge market health.
Look for Closing Statistics in Your Area
Closing statistics are the easiest way to gauge market health, and it’s something that your real estate agent or local closing agent can help you with. Is the number of closings in your area up or down from last year? How does it compare over the last few months – have closings been increasing, staying the same or going down? These clues can give you a big hint about the health of the real estate market in your area.