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Buying A Home In Cleveland - Step 5 Negotiating

by The Schuman Team

Negotiations is one of the most important steps of the home buying process and also the most emotional. Today we will go over the basics.

TIME TO NEGOTIATE

There are 3 main instances when you negotiate during the buying process:

1.  The Initial Offer

2.  After Inspections

3.  At Walk Through

Let's go over these in detail.

THE INITIAL OFFER

Most people are aware of this main negotiating phase and it was explained briefly in step 4 - "Writing An Offer".  We discussed the need to look at market statistics and figure out a fair price for a home. That was the easy part. Now comes the hard part ----getting the seller to accept.

Every seller thinks their home is the greatest thing in the world. They likely have a flood of memories in the home and spent a lot of money on maintenance or upgrades. They want as much as possible for it. A buyer on the other hand always wants to pay as little as possible,  so the process begins on uncommon ground.

Sometimes agreeing on terms is easy but most of the time there is a lot of back and forth with emotions getting magnified. This is why having an agent is so important, having a steady partner to guide you through the process.

Let's assume you and the seller have come to terms and the contract is signed by all parties. Now comes phase 2 of negotiations.

AFTER INSPECTIONS

Once the home inspection process is completed, there will likely be items that appear on the inspection report that you will want addressed.  Thus begins round 2 of negotiations.

A buyer should concentrate on health, safety and structural issues that are discovered by the inspector. These are items that will typically be fixed by a seller without much fuss. It is the extraneous items that many buyers often ask for that causes this phase to become contentious.

What is extraneous is up for debate, which is where the problems begin. Buyers often feel like this process gives them a reason to re-negotiate on price, which is not the purpose of the inspection. Then, they ask for all sorts of items or a reduction in price and the fireworks go off.

Focusing on items specifically highlighted by your inspector is a good way to come across as genuine to a seller, and will likely get you what you want.

Now, if you're the type of person who likes to push the envelope and see what you can get away with, feel free to ask the seller for the sun, moon and stars. Just don't be surprised if this strategy ends up hurting you.

 

THE WALK THROUGH

Within 3 days of closing, a buyer will have a chance to walk through a home to make sure it is in the same or similar condition that it was at the time of the execution of the purchase agreement.

Typically, this takes 10-15 minutes and goes smoothly. In rare cases, a problem may arise where buyers and sellers need to negotiate prior to closing.

For example, as terms of the agreement, a seller could have promised to fix an oven that was not secured ( a possible safety hazard ). Then, during the walk through, it is noticed that the sellers didn't do it.

To alleviate problems during the walk through it is recommended to get paid receipts of any work that was done prior to the walk through.

How To Determine A Home's Value

by The Schuman Team
Price For A Home
How Much To Pay For That Home?

Determining the value of a home is a big challenge to both buyers and sellers.

Since the seller, by virtue of their list price, has already determined the price they feel their home is worth, we will focus on helping a buyer determine value.

 

WHO DETERMINES VALUE?

In simplest terms, a home is only worth what someone is willing to pay for it. In a perfect world, a buyer would find a home, tell the seller how much they want to pay for it, the seller would easily agree, and everyone would then hold hands and sing Kumbaya.

We all now this isn't how things work. Every buyer wants to pay as little as possible, and every seller wants as much as they can get. There is typically disagreement before an offer is even made.

For this reason, negotiating the price on a home is one of the more difficult transactions you will encounter. If you follow our tips below, this part of the process will be easier.

 

START WITH THE FACTS

There are 3 statistics that can be used to help determine value:

1. Price of Recent Sales ( Comps )

2. Average Price Per Square Foot

3. Percentage of List Price

Let's go over each one of these starting with comparable sales.  The best way to get value is to find recent similar sales ( same neighborhood, price point, sold within 6 months ) and compare them to the home you are buying. While it certainly helps if you have personally seen these homes when they were for sale, it isn't a must.

Start with the best recent sale and compare it to the home you want to buy. You should consider what the recent sale has/doesn't have and make appropriate adjustments.

For example, if you are looking at a home listed for $400,000 that has a 3 car garage, and the best recent sale was $375,000 but had only a 2 car garage, an adjustment would be appropriate of $10,000-$15,000. You can do the same thing with number of bedrooms, baths, and amenities such as finished basement.

While price per square foot is not the preferred method of determining value for an appraiser, it is sometimes helpful as a secondary method just to make sure you are in the ballpark.

For example, if homes are selling for an average of $150 / sq. ft. , with the range being $125-175, paying $185 may be excessive, unless there are compensating factors. Remember, we are talking about AVERAGE price/sq. foot, so if the home you are buying is above average in your opinion ( updates, superior finishes, etc...) than paying higher in the range would be acceptable.

Finally, seeing what homes sell for in terms of sale price/final list price ( it is typically 94-96% in most areas here in Cleveland ) will give you an idea of a range in which you could expect to pay for a home that you feel is priced fairly.

If homes are selling for 95% of the value, than in the example above, paying $380,000 for a $400,000 home would be realistic. That doesn't mean you couldn't buy it for less, or you wouldn't have to pay more, these figures are just used to help guide you.

 

GET RID OF THE NOISE

It is very easy for a buyer to get distracted and lose sight of the big picture.

There are many different personalities at play; buyers, sellers, agents, and often parents and friends who always want to put their two cents into the equation. Therefore, we recommend focusing on the numbers and following your instincts.

Having a knowledgeable agent to guide you is a major plus. However, at the end of the day, you are the one who ultimately makes the decisions, so you need to be comfortable with the process of determining value.

By following our advice, you will be on your way to figuring out a fair price for any home.

Negotiating In A Sellers Market

by The Schuman Team

Tips For Negotiating In A Seller's Market

In a highly competitive market, buyers must be prepared to negotiate more aggressively than in other markets. The following are a few tips that will help with the process:

1. Write The Offer ASAP - In this market, you need to move with a huge sense of urgency or risk losing the home.

2. Show You Are A Strong Buyer - Large earnest money and a solid pre-approval are extremely helpful.

3.  Be Flexible On Dates - Don't let closing dates keep you from getting the home you love. If you can work within the sellers time frame, do so. This gives the seller one less thing to think about and starts things off on a positive note.

4. Work Quickly - A seller appreciates a buyer who really wants their home. Also, the longer it takes to negotiate, the greater chance of another buyer coming into the picture.

5. Get It Signed! - It is not an agreement until all parties have signed, including any terms that changed during negotiations, so don't delay.

There is certainly a little more to negotiating than this, but these suggestions will put you on the right track.

With limited inventory and rates creeping upwards, competition is heating up for nice homes. A proper approach to negotiating can make all the difference in the world.

 

 

 

How Much Will The Sellers Sell Their Home For?

by The Schuman Team

how much is that home worth?

For those of you who are looking for a quick answer to this question, I'm afraid it's not quite so simple.

The real answer is "we won't know unless we try", but is is much more complicated than that.

In general, homes in the Cleveland area will sell for between 92-95% of their final list price. But this is just an average and every situation is unique and depends on several variables, the most important being seller motivation.

I realize that buyers would love to know how much a seller will take for their home up front, but it just doesn't work that way. If it did, there would be no negotiations, and what fun would that be?

The bottom line is that until a seller is staring at a written offer, even they don't know what they'll take. Sure, they usually have an idea, but they rarely ever really know until they get an offer and start to crunch their numbers.

While we don't have a specific answer to the original question posed in this post, we do have some helpful tips in general:

LEARN THE MARKET  - Once you see a lot of homes, you will be able to learn more about value and the nicest home in the price point will stand out.

DON'T HESITATE - If a specific home stands out to you as being heads and shoulders nicer than the rest, other buyers will likely feel the same way. Don't lose out on a great home.

GO AHEAD AND WRITE AN OFFER - Some sellers know their home is overpriced but just don't want to lower it. They may be open and expecting to negotiate, so don't let a price keep you from trying to buy a home that you really love.

STATISTICS ARE ONLY A GUIDE - Sure, market statistics are important to help you figure out how much to offer on a home but don't be afraid to trust your gut instinct as well.

When all is said and done, learning the market is important and having a knowledgeable agent to guide you through the process is critical to your home buying success.

Displaying blog entries 1-4 of 4

Contact Information

The Schuman Team
HOWARD HANNA REAL ESTATE SERVICES
3550 Lander Road
Pepper Pike OH 44122
Dan: 216-346-3235
Amy: 216-403-9189
Fax: 216-456-2333