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Buying a House in a Buyer’s Market Part Two

In “Buying a House in a Buyer’s Market – Part I,” we explored the importance of timing when it comes to buying a house in a buyer’s market. Finding the right house at the right price should be a buyer’s first and final goal with a long term plan of living there as a means of riding out bad market conditions that can occur. This time we’ll take a look at how technology and an experienced buyer’s agent, negotiating effectively and avoiding gimmicks are also essential when it comes to buying a house in a buyer’s market.

All sorts of real estate Web sites are popping up online these days. But among the most useful is Zillow with its “Zestimate” valuation tool, a computer-generated estimate of a house’s market value. Several years ago a consumer tool like Zestimate wasn’t available and interested homebuyers would have to pay around $300 to have a property appraised in order to obtain its value. What’s great about Zillow for buyers is how much you can learn about the houses in your target neighborhoods. It can really help with weeding out the houses you’re not interested in, especially those that don’t fit your criteria when it comes to neighborhood, asking price, size and amenities. Because there are many serious buyers out there you have to move quickly when you find a reasonably priced home.
However, the long lists of homes Zillow generates can be overwhelming and how do you know how current the data is online? This is why many serious buyers hire a buyer’s agent to not only sort out the long lists of homes but to perform a comparative market analysis as well. Sure Zillow can perform a comparative market analysis, but there’s no substitute for the human judgment of an experienced buyer’s agent, especially one who knows your target area.

Another essential part of buying a house in a buyer’s market is negotiating effectively. Just because the sales pace slows down over the holidays doesn’t mean you should toss out lowball offers. Sellers won’t negotiate when they feel insulted. As a buyer you’ll need to defend your offer as much as the seller will need to defend his asking price. With a comparative market analysis you’re in a much better position to offer 6% less than the asking price if you can show that 20 comparable homes for sale in the same neighborhood are asking 6% less than this particular seller is asking for his home.

Finally, avoid gimmicks like offers for flat-screen TVs or weekends at vacation homes that have nothing to do with the transaction at hand. Make sure that any incentives that are offered have something to do with the house like upgraded countertops, decorating allowances or payment of mortgage closing costs. If a seller offers to subsidize the transaction with a $500 TV, ask for $500 off the asking price. You’ll also want to avoid interest-only or pay-option ARMs. In a market where house values could drop, it’s anyone’s guess when mortgage rates will rise. You’re better off getting a mainstream 30-year fixed loan that you can afford so you can avoid becoming upside down in your mortgage should housing values continue to go down.