Do Your Due Diligence Before Making An Offer on A Home
Many areas of the Country as of this date are experiencing low inventories of homes to sell. At our marketing meeting we get the questions “do you have any unique buyer’s needs” and the answer I have is yes – there aren’t enough homes for my buyers to purchase. With inventories low and multiple offers on those homes that are for sale, are these buyers today setting themselves up for an “upside down” situation in the future.
Here is an article by Dian Hymer about making offers on homes and buyer’s doing their investigations before making an offer.
In low-inventory markets that are now common in many areas of the country, buyers might be prone to jump at a listing they wouldn’t even consider if there were a lot of homes for sale.
This desperate approach to home buying could cause you problems down the line when you need to sell and you realize you paid too much, overlooked property problems, or bought in the wrong location.
A listing that has been on the market for a long time could indicate a problem. Is the listing not selling because it’s priced too high and the seller is stuck unreasonably at a high price?
Does the property have problems that can’t be remedied for a reasonable price? Or is the deferred maintenance so widespread that buyers are turned off, particularly if the listing is priced too high for the market and the amount of work that’s required?
In some areas, it could be none of the above. The reason the listing hasn’t sold could have to do with a slow market where it takes a long time for listings to sell, particularly if they are at the high end of the market.
HOUSE HUNTING TIPS: Before taking the leap and writing an offer on a listing that has been on the market awhile, find out why it hasn’t been selling. Ask the listing agent if the seller has received offers and why they didn’t end in a ratified contract.
The seller’s agent may be reluctant to have this discussion. In that case, let your agent know what price you’d be willing to offer. Ask your agent to find out if the seller’s agent thinks it’s worthwhile to make an offer.
Listing agents usually want to take a low offer to the seller in writing. So you may have to go through this process to even find out if there’s a chance of buying the listing for a reasonable price.
The seller could flatly turn the offer down. But if the listing doesn’t sell for several more months, the seller might soften her stance.
A listing that is difficult to get in to see is another red flag. Does the seller really want to sell? If not, you could waste a lot of time trying to buy a home you’d love to own, but end up with nothing but frustration.
Another type of listing to be wary of is one that is on and off the market repeatedly. This is typical behavior of a seller who wants to sell only for a certain price that is too high for the market. It is also characteristic of homeowners who want to sell only if they have a place to move to and they can’t afford to buy another home until they’ve sold their current home.
These are maybe sellers who can also waste a lot of your time and emotional energy. Some sellers try to sell contingent on finding a replacement home. If you go into contract to buy a home with this contingency, you should also have a contingency in the contract that lets you out of the contract if you find another home to buy before the sellers find a replacement home. You should also get a break on the price to compensate for the uncertainty.
A listing that has been back on the market (BOM) over and over could signify a problem. Find out the reason why the deals didn’t stay together. Was the seller unrealistic about negotiating on defects discovered during inspections? Was there a problem with the buyer’s financing? Did the appraisal come in low? Or was it just the seller’s bad luck.
THE CLOSING: For peace of mind, investigate carefully before you buy.
Dian Hymer is a real estate broker with more than 30 years’ experience, and is a nationally syndicated real estate columnist and author.
Filed under: General RE Tips
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