RE/MAX Real Estate Guide and FAQ - Questions and Answers for Real Estate Buyers
RE/MAX Valley Real Estate, Boardman, Ohio

Real Estate Guide

Buying Your Home

 

RE/MAX Valley Real Estate

RE/MAX
Valley  Real Estate
1040 South Commons Place, #102
Boardman. Ohio
(330) 629-9200

RE/MAX Real Estate FAQ - Buying Your Home, Working With A Real Estate Agent

Buying Your Home - Questions and Answers
'Negotiating and Closing a Good Deal'

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What is the first step to negotiating a home?
Knowing your limits is on the most important rules of negotiation, and finding out what you can afford is one of the fist steps, which can be done by pre-qualifying for a home loan. This step will help you narrow your search for both a neighborhood and particular houses.

A pre-qualification is a simple calculation that considers several factors, but homes in on your debt-to-income ratio. There are no guarantees with a pre-qualification, but it will be expected of you when you make an offer on a home.

See Also  

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What are some tips on negotiation?
The more you know about a seller's motivation, the stronger a negotiating position you are in. For example, seller who must move quickly due to a job transfer may be amenable to a lower price with a speedy escrow. Other so-called "motivated sellers" include people going through a divorce or who have already purchased another home.

Remember, that the listing price is what the seller would like to receive but is not necessarily what they will settle for. Before making an offer, check the recent sales prices of comparable homes in the neighborhood to see how the seller's asking price stacks up.

Some experts discourage making deliberate low-ball offers. While such an offer can be presented, it can also sour the sale and discourage the seller from negotiating at all.

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What do I do if I find myself in a multiple offer situation?
During the go-go real estate years 2000 - 2006 multiple offers were the norm, but because all real estate is based in localized markets, multiple offers are still common in some areas even in a buyer's market. In Ohio, these days, multiple offers on foreclosed homes is more common than ever before.
Faced with a multiple offer, we're often asked, "How do we really know there actually are one or more other offers?" The simple answer is, "We don't." However, what big advantage does the listing agent gain by making the claim? Firstly, many buyers don't want to part of a bidding war and withdraw, so s/he runs the risk of losing your bid. Secondly, let's do the math. Even if  the threat of a multiple offer garners a $5,000 increase in the offer, that's a gross commission gain of only $150 which s/he then must usually split with the listing broker. Again, not worth the possibility of losing the sale altogether. Lastly, real estate agents run afoul of the license law when they lie to other agents and their clients. They can lose their license to practice real estate. This clearly is not worth the small increase in commission. In our experience, if the listing agent says there are multiple offers, there's a 99.9% probability that there are.
So, you're asked to make your highest and best offer on the home of your dreams. What do you do? You don't get caught up in the frenzy of an all out bidding war. You rely first upon your REALTOR to make sure s/he has provided the most up-to-date information on comparable properties, current market conditions, and a outlook for the economic future of the neighborhood or locality. Secondly, you check and double check with your lender to make certain that you can afford any increase in monthly payments, and have enough cash for the additional down payment and closing costs.
Armed with these facts and figures you make your offer using the principle of 'no regret.' If you make your offer high enough to win the bid, there never be a doubt that you paid too much for the home. Conversely, if you lose the home of your dreams to another bidder, there never should be a regret that you didn't bid enough.
Finally, remember too, that price isn't the only thing you can offer. An lower offer but with far less in the way of seller concessions and contingencies, and the possibly of quick and easy close, may be far more attractive to a seller than one with many contingencies to work through.

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Is there a secret to good negotiating?
There are several cardinal rules to negotiating effectively.
  • First, do your homework. Learn as much about the seller as you can
  • Have a good idea of the home's real value. A comparative market analysis (CMA) provides the background data upon which to base your offer. .
  • Play your cards close to your vest. Don't  reveal too much information to the other party or their agent.
  • Don't let yourself get rushed into any decision, no matter how tempting it may be. Consider all the facts first.
  • Finally, hire help. Someone with proven negotiation skills - a RE/MAX Valley Real Estate Agent.

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Can you negotiate the price on new homes?

See  Buying Your Home - Can you negotiate the price on a new home?

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Are interest rates negotiable?
Some lenders are willing to negotiate on both the loan rate and the number of points but this isn't typical among established lenders who set their rates like large corporations set the prices on their goods. Nevertheless, it pays to shop around for loan rates and know the market before you go in to talk to a lender. You should always look at the combination of interest rate and points and get the best deal possible.

The interest rate is much more open to negotiation on purchases that involve seller financing. These usually are based on market rates but some flexibility exists when negotiating such a deal.

When shopping for rates, look for published rates in local newspapers or check the growing number of Internet sites that publish such information.

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Do I need an attorney when I buy a house?
In some states, you do need an attorney to complete a real estate transaction. In Ohio, a real estate attorney is authorized to provide a title search and serve as escrow agent, but is not required to write real estate contract.

Most home buyers are capable of handling routine real estate purchase contracts as long as they make certain they read the fine print and understand all the terms of the contract. In particular, you should be clear on the terms of any contingency clauses that will allow you to back out of the contract. If you have any questions at all, it may be advisable to consult an attorney to avoid future legal hassles.

To find a real estate attorney, contact your local bar association (Ohio), which may offer local referral services. You may also ask friends or your real estate agent for their recommendations. When you have several names, call each to find out about fees and their level of experience.

In general, more experienced attorneys will cost more, but real estate fees as a rule are small relative to the cost of the property you are buying.

See also  7 Purchase Contract Items to Watch for in a Contract

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Do I Need Home Inspection?
The experts say YES! A home inspector will conduct a thorough examination of your home to detect any hidden defects or potential systems or components requiring attention. You should receive a detailed report of the condition of your home so that you can plan for needed repairs and upgrades when it’s time to make them.

At the present time, home inspectors are not required to be licensed in the State of Ohio, therefore, it's important that you seek the expertise of only qualified home inspectors.

Resources

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Should I include an inspection contingency in my offer?
An "inspection  contingency" protects you as a buyer in a purchase offer by allowing you to cancel closing on the deal if an inspector finds problems with the property.

As soon as the seller accepts a written offer, the document becomes a legally binding contract. The purchase contract can be written to include a contingency for any repairs found to be needed or related items you ask the seller to repair or update before closing. Should the seller refuse to deal with these issues, and you have such a clause in your contract, you can delay or possibly cancel the closing and withdraw from the contract.

If the contingency is not stated in the contract, you could face losing your deposit. There also may be costly legal implications stemming from backing out of a contract.

Most inspection contingencies today are limited as to a specified minimum amount of repair to protect the seller from a buyers 'wish-list' of frivolous inexpensive repairs. See Can I use the home inspection to renegotiate the purchase price?

You usually will have the right to choose the inspector (and be responsible for paying for the inspections). In addition to an overall inspection for structural soundness, you can request a satisfactory pest control inspection report, roof inspection report or contingency for no potential environmental hazards such as asbestos or radon gas.

See Also:  Buying Your Home - Home Inspections & Warranties

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What contingencies should be put in an offer?
Most purchase offers include two standard contingencies:
  • Financing contingency, which makes the sale dependent on the buyers' ability to obtain a loan commitment from a lender,
     
  • Inspection contingency, which allows buyers to have professionals inspect the property to their satisfaction. See Buying Your Home - Home Inspections and Warranties.

As a buyer, you could forfeit your deposit under certain circumstances, such as backing out of the deal for a reason not stipulated in the contract.

See also   Buying Your Home - The Offer .

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What is the difference between list price, sales price and appraised value?

See Selling Your Home - Pricing Your Home To Sell

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How did the seller arrive at his price?
Most of the time, we won't know what voodoo or magic was involved - but here is what he should have done to arrive at his price.

Because the real estate market is continually changing, and market fluctuations have an effect on property values, it's imperative to select the list price based on the most recent comparable sales in the neighborhood. A comparative market analysis (CMA) provides the background data upon which to base the list-price decision.

As a buyer, your REALTOR should also perform this same service for you. Never enter into negotiations without the knowledge a well prepared CMA provides. If the seller's price is all 'voodoo,'  you'll know it.

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Can you buy homes below market?

See  

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Are low-ball offers advisable?
A low-ball offer is a term used to describe an offer on a house that is substantially less than the asking price.

While any offer can be presented, a low-ball offer can sour a prospective sale and discourage the seller from negotiating at all. Unless the house is very overpriced, the offer will probably be rejected.

You should always do your homework about comparable prices in the neighborhood before making any offer. It also pays to know something about the seller's motivation. A lower price with a speedy escrow, for example, may motivate a seller who must move, has another house under contract, or must sell quickly for other reasons.

In a Buyer's Market some buyers get carried away with 'low ball' offers thinking that all sellers are desperate to sell. This simply isn't the case. Sellers in this type of market are very realistic about their prices and price them very close to the market. Therefore, they often have far less 'wiggle' room and will actually negotiate less than in other markets. While low offers may be a good strategy (see below), 'low ballers' rarely succeed.

Tip: If you make a low-ball offer on a REO property and don't get a response, simply make a higher one if you think the property is worth it. Bank owned property administrators are too busy to bother with irrational offers, but one approaching the target value will get their attention.

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Is a low offer a good idea?
While your low offer in a normal market might be rejected immediately, in a buyer's market a motivated seller will either accept or make a counteroffer. Full-price offers or above are more likely to be accepted by the seller. But there are other questions to ask and consider:
  • Is the offer contingent upon anything, such as the sale of the buyer's current house? If so, a low offer, even at full price, may not be as attractive as an offer without that condition.
  • Is the offer made on the house 'as is,' or does the buyer want the seller to make some repairs or lower the price instead?
  • Is the offer all cash, meaning the buyer has waived the financing contingency? If so, then an offer at less than the asking price may be more attractive to the seller than a full-price offer with a financing contingency.

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Who gets the furnishings when a home is sold?

See Buying Your Home -  What's the difference between furnishings and fixtures.

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When is the best time to buy?
Because many buyers prefer to move in the spring or summer, the market starts to heat up as early as February. Families with children are eager to buy so they can move during summer vacation, before the new school year begins.

The market slows down in late summer before picking up again briefly in the fall. November and December have traditionally been slow months, although some astute buyers look for bargains during this period.

Ask your agent for the market's Absorption Rate into which you wish to buy. This will tell you haw much leverage you have in negotiation. When sellers compete with other sellers (a Buyers Market) the buyer has the upper hand.

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How much does my real estate agent need to know?
Real estate agents would say that the more you tell them, the better they can negotiate on your behalf. However, the degree of trust you have with an agent may depend upon their legal obligation.

Agents working for buyers have three possible choices:

  1. They can represent the buyer exclusively, called single agency,
  2. They represent the seller exclusively, called sub-agency,
  3. They represent both the buyer and seller in a dual-agency situation.
    • (In Ohio, there is a hybrid dual agency called "split" agency, whereby the buyer and seller are represented by two different agents from the same real estate brokerage.)

In Ohio, agents are required to disclose and explain all possible agency relationships to you BEFORE you enter into a real estate transaction by means of a disclosure called the Consumer Guide To Agency Relationships. This should be given to you at first meeting. Further, in Ohio, before an offer is made, the agent is required to disclose to you exactly how you are being represented in that particular transaction. This is done with an another disclosure instrument called the "Agency Disclosure Statement".

You are not required to accept the way the agent wants to represent you. If, for example, you do not want your agent to be a dual agent (representing both you and the seller) you may find another agent to represent you exclusively, or have one appointed to represent you.

See Also  How do I know the real role of my REALTOR in representing me?

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What do you think of get-rich-quick real estate schemes?
See  Investing In Real Estate: Foreclosures - What do you think of get-rich-quick real estate schemes?

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