If you are getting ready to buy a home in Tallahassee, do you have your negotiation plan prepared ahead of time?
For example, how do you determine how strong your offer will be? Does it even matter?
If you are like most new buyers, you have no real plan. When you find the home that you want, without a negotiation plan, you will end up deciding to low-ball an offer for the purpose of seeing what the seller will do.
Is this your plan?
If so, you might want to read further into this article to see why different areas and different price ranges require a different negotiating strategy when buying a home.
In order to demonstrate a smarter way to go about making an offer on your home, let's use some real-world information.
You see, that is what a top-notch real estate buyer's agent will do. They will look at the relative supply of homes for sale in your market area to help guide you to the offer that will get you the lowest price.
The liquidity for homes in your price range (in your real estate market area) will determine just how competitive the negotiation is going to be. Most buyers don't think this through, but if you find the "best" home in your price range, aren't you concerned that some other buyers will find it too?
Are you prepared to negotiate against another buyer for the home? Do you even need to? These questions are exactly what a great buyer's agent will find out from you in order to guide you to the best deal possible.
Current Market Conditions In Tallahassee
The following five tables provide information about the relative supply of homes in Tallahassee. While they look like a lot to take in, the fact is they are simply a look at the months of supply of homes for sale in Tallahassee, organized by area, price range, and new construction versus resales.
For each table, the price range is broken down into increments of $50,000 and shown on the far left. To the right of the price range, there are three columns of three sets of numbers. The first column is the number of homes for sale, segmented by all homes, new homes, and then resale homes. The middle column shows the total number of homes sold in the past year, segmented the same as was the first column. The final column records the months of supply of homes for sale, with the same segmentation as the previous two columns.
For the purpose of learning about better negotiation practices, we will assume a scenario where you are interested in a $320,000 home in Tallahassee. We will then look at how you would approach it based upon where it is located within the Tallahassee real estate market.
Our first table shows overall conditions in Tallahassee (Leon County, FL). If you scan down the price range to where you will find information about a $320,000 home, you will see that there are 93 homes for sale in Tallahassee (19 new and 74 resales). 235 homes similarly priced have sold over the past year, which means there are 4.7 months of supply of these homes.
Anything lower than a 6.0 months of supply means you will be negotiating in a seller's market, so overall, expect there to be other buyers that will want the same home that you have found, and well-priced home seller's can expect to generate multiple buyer prospects in the hopes of creating a bidding war.
Fortunately for you, your real estate buyer's agent has more information than what is shown in this table. So let's take a look at housing market conditions in each quadrant to see how to best negotiate for a home in that quadrant.
Homes For Sale In Northeast Tallahassee
The following table shows that there are only 4.4 months of supply of homes for sale in your price range in NE Tallahassee. Additionally, NE Tallahassee typically records one $300K to $350K sale every other day (182 sales per year / 12 months = 15 per month or 1 every other day), so if you have found the best one in that price range, there are likely several other buyers looking at it too.
If this home is not the perfect fit for you, let it go so that you do not end up in a bidding war.
But if it is right for you, waste no time and submit a very strong offer for it right now. Not tonight, certainly not tomorrow, but right this instance of it is likely somebody else will control the negotiation (and you will not get the house).
Homes For Sale In Northwest Tallahassee
If you are shopping for the same home in NW Tallahassee, then market conditions (and your negotiation tactics) must be modified.
There are just 19 sales per year in your price range in this area, meaning that only 1 to 2 buyers are in the market at any given time. With November being a bit slower time of year, it is likely that you are the only one seriously looking to buy a home in this price range in NW Tallahassee right now.
If this is the right home for you, you should take decisive action. Get your buyer's agent to show you the lowest likely price for which this home should sell, and make an offer based upon that. The key is to make your offer strong enough that the seller is scared to counter, as the seller knows there are few buyers right now for this home. If you come in too low, the seller will be forced to counter (thus you are giving control of the negotiation to the seller). The limited demand for this home gives you initial control of the negotiation, don't blow it!
Homes For Sale In Southeast Tallahassee
When we move our scenario to SE Tallahassee, we see a situation that looks similar to NE Tallahassee, but with a twist.
Currently, there are only 3.3 months of supply of homes for sale like the one you are wanting to buy, but unlike NE Tallahassee where a buyer is purchasing one every other day, SE Tallahassee sees on purchased every 11 days (33 sales per year). This means that you will be negotiating in a low-liquidity seller's market.
Here is where the experience of your home buying team kicks in. How well is your real estate buyer's agent trained for understanding current market conditions, because this scenario takes some finesse. While it is a seller's market, it is also November. Homes in this area are in relatively low supply and relatively low demand ... so what do you do?
Much like we did in NE Tallahassee, we submit an immediate offer, but we are less worried about competition here. Because there might be another buyer, we need to make our offer strong, but it is not likely we need to come in above the asking price (unless the shrewd listing agent priced it below market to draw out all buyers).
It is a situation like this where you have to be able to trust your buyer's agent (so make sure you choose a buyer's agent worthy of your trust before you get to this point).
Homes For Sale In Southwest Tallahassee
The final quadrant in Tallahassee shows us a very different scenario.
As your buyer's agent, I would ask if you this ... There are only two homes for sale in your price range, and only one sale within the past year. Do you really think it is prudent spending this amount of money in an area where it seldom occurs? What will happen to you if you need to move next year? Are you concerned about your investment?
Now with all that being said, and assuming you want the home, you can pretty much take your sweet time and make sure you get the best deal possible. Current conditions suggest you have no competition (one buyer last year ... are you this year's one buyer?).
I hope our review of real estate market conditions in Tallahassee has helped you understand the importance of using supply and demand to help guide you in your real estate negotiations.
Also, I hope you see that you need a lot more from a real estate buyer's agent than simply a key to get in to look at houses. When it comes time to negotiate, you will want somebody with superior information and experience to guide you and help save you money.
If you are shopping for a buyer's agent in Tallahassee, we would love the opportunity to interview for the job. Simply click on this link to get in touch with our home buying team.
Joe Manausa, MBA is a 27 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.