How to Get a Really, Really, Really Good Deal on a Home

MSN Money has an article on EXACTLY the strategy I'm using as we look for a new house. As I've said, now is a great time to buy a house, and one reason it's so good is that prices are coming down, everything is negotiable, and sellers are not discounting any offer (even if it's a very lowball offer, they still have to ask if it's worth taking it now or risking holding on to the place for another year or so.)

This piece gives details on how to lowball a home seller. The highlights:

Home sellers are not automatically turning up their noses at offers that come in far below their asking prices these days as prices stagnate and the inventory of homes for sale remains elevated in many markets.

And here's an example of what's happening:

Before he even made an offer, the asking price had dropped by about $80,000, he said. After O'Heron made his case for an even lower price, he bought the home for $270,400, with about $11,000 in other credits. The net price ended up being $115,000 below the initial asking price.

And here's how he was able to do this:

O'Heron was able to take advantage of a market in which buyers decidedly hold the upper hand, with its excessive for-sale inventory due in large part to job losses in the area.

This is exactly the situation I'm facing. We're in a market that's been hit at least as hard as the national averages -- probably harder. We've had some job losses as a community and a state (Michigan), home inventory is up, time on the market is up, and selling prices are down. I think nothing of seeing a $375,000 home and thinking the "real" price is probably in the $325k range.

So here's what I do:

1. I identify homes we may be interested in. My agent emails me new listings based on my criteria, I have access to the local city MLS system, we search the paper each weekend, and we have friends and family (including a banker friend) on the lookout for us, telling us of new places they find.

2. Once we have a vague idea that the home is something we could be interested in, I go online and download the MLS information giving me all the details on the home. I get a consumer-based report, not the ones the agents get, so if I need extra information, I call or email my agent.

3. If it still looks good, we set up a visit and see the place. We match it up against our criteria and see decide whether or not it's a possibility.

4. If it's at least in the ballpark, I flag it on our agent's website and I get email updates on any changes in the property (sold, price reduction, etc.) Then I wait...and watch the price drop. One spot I have had my eye on started at $459k and is now at $419k a few months later. If it drops another $50k or so, we may make a move.

5. So far, none of the houses we've liked have been sold out from under us. And if they were, that would be ok, we haven't been absolutely in love with anything yet. But if we did find something we just HAD to have, I think we'd make an immediate offer. We'd still go low, but probably not as aggressively lower as we might otherwise. Who knows what would really happen, we haven't been to that point yet.

Comments

[Rhea]

Here's another idea. Wait until right before Christmas. Check the listings. Anyone selling around then is beyond desperate.

[Carl Heldmann]

Don't forget, it works both ways. Yours will sell for less too.

[Duane Gran]

When it comes time to make an offer, ask for the following three things:

1) Purchase price (most of what you are writing about here)
2) A long closing time
3) Seller paid closing fees

Item #2 is the red herring. Ask for a closing in five months and most sellers sitting on inventory will counter offer 2-3 months. Use this as leverage to keep your position on items #1 and #3 while giving in to #2, which you really didn't care about anyhow.

In a word, never negotiate just over price.

[brent]

I know a guy who bought his home by just going around to people who'd had their house passed in at auction and offered them $20,000 less than it passed in at.

[kitty]

Don't you think prices will come down even more?
Granted, where I live (Southern NY State, within an hour from NYC) the prices are still very high -- 375K wouldn't even buy a two bedroom condo here. A lot of people with ARMs are still facing interest hike; also some of the "prime" market may have foreclosures too with banks having given so many loans (even prime) without any regard to income.

This is totally uninformed opinion, and obviously based on a different market.