Anybody who is thinking about buying or selling a home right now knows that we are in a bad housing market. People who want to sell a home in Tallahassee have way too much competition, and many people who want to buy a home have to sell their home first. But there is a small group of people who are in an unencumbered position to buy a home, and these 5 tips will serve them well in a bad housing market.
♦ Know The Housing Market - The best way to snag a great deal on a house in a bad housing market is to come armed with a boatload of data showing that you’ve done your homework and know what the place is worth. Thankfully, information on everything—from what comparable houses have sold for to what exactly has been remodeled, and when—is pretty much at your fingertips online or through your real estate agent. You can use information from our Tallahassee Housing Reports as well as via government databases and the Leon County Property Appraiser's Web Site.
Such data are especially useful when making an offer on a foreclosed home that’s been repossessed by a bank, where you won’t have to deal with touchy issues like a seller’s sentimental attachments to his home. Keep in mind that banks are swamped with properties and they just want to move the file (property). Amateurs unsuccessfully try to low-ball the bank. Seasoned experts load the offer with a cover-sheet full of market data that moves the bank to a “yes” determination.
♦ Don’t Be Penny Wise … and Pound Foolish - Conventional wisdom is to look at every penny in the deal, negotiate with absolutely every single participant from the lender to the maintenance man. I disagree. Never lose focus on the bottom line. I have seen a lot of penny wise buyers who get absolutely taken in a real estate transaction, but feel like a million dollars because they beat a $60 fee out of their lender.
Don’t be so focused on everybody around you, focus on the total cost of the purchase. This advise is very different from the non-technical journals that propose that you negotiate with everybody involved, from the property inspector all the way down to the maintenance team. Be smart enough to work with an established team, and even smarter to focus on your bottom line.
♦ Don’t expect “found money" - With sellers increasingly desperate and the number of “distress” sales and auctions skyrocketing, there are certainly plenty of deals around. But don't expect that you can literally buy a house one day and sell it for more the next. Most sellers that finally capitulate at a low price have already exhausted every other avenue, not to mention that their lender had to bless the deal. What this means is that you are not going to buy a property "way below the market," as the market has already seen this home.
Think about this ... with professional investors hovering over the market every minute, all "deals" have already been seen by other investors, thus anyone who buys one—even at a discount—has to see substantial value in the house that others buyers can’t. For example, will a well-placed $15,000 in improvements yield twice the value? Or is school growth next year likely to increase demand for houses in the neighborhood? The bottom line: While it’s always worthwhile to keep your eyes out for that needle-in-a-haystack deal, better to focus your efforts on a house that stands a good chance of building equity over time.
♦ Demand The Best Assistance - This tip might not seem like rocket science, but I see it violated over 80% of the time in real estate transactions! Did you know that most real estate companies charge the exact same when helping a buyer purchase a home in Tallahassee? Now, do you think all real estate companies and all real estate agents are the same? If you do, then I feel sorry for you. That means you are part of the 80% of homebuyers who had less than a stellar real estate agent.
No matter what profession you work with, there is an echelon of quality to choose from. Typically, the top 1% of any industry contains the people with whom you would love to work, but alas, they are so expensive only the richest people can afford them. But in real estate, most real estate agents and companies work on a commission basis. That means you can demand the best! So, in a bad housing market, demand the best!
♦ Location, location, location - Yep, this still matters. Even if you have no plans for children, school zones will likely matter to your buyer (when you sell). Don't be foolish enough to fall for a deal that is actually a current seller bailing from a bad location choice. Even in a bad housing market, there are some great deals that aren't so great.
Your real estate agent cannot discuss schools with you, but she or he can discuss activity and supply by school zones. Do your own research on every area in which you are interested, do not just rely on price to guide you. Having a knowledgeable, highly trained, and experienced real estate agent will ensure that you do not end up owning the house that nobody else wanted in a bad housing market.
Follow these 5 tips on how to use a bad housing market to your advantage, and you will look back in five or ten years and realize how smart you were to take advantage of opportunity when it came your way. With a little diligence and some help from a great real estate professional, you can make 2011 the year you "beat the market."
Joe Manausa, MBA is a 26 year veteran of real estate brokerage in Tallahassee, Florida and has owned and managed his own company since 1992. He is a daily blogger with content that focuses on real estate analytics and providing his clients with a tactical advantage in today's challenging market.