In my experience, the majority of home buyers want to leave the negotiating table with a feeling of having paid a favorable price for the home they buy; as they should, given the scope of the purchase they are making. But for some, the sport of shopping for the best deal becomes paralyzing for the buyer whose focus is more on getting a good deal than the right property. Adding to the confusion, many of the price shoppers who hope to achieve wholesale value by using a retail buying process will be in for a much longer and more painful process because their actions are inconsistent with the desired intent.
If you want to get wet, stand in the rain!
The buyer that hopes to find a great deal should be rewarded for their patience and restraint. Being committed to finding good value (or creating good value through negotiation) while being bombarded by attractive features and fancy extras is a difficult discipline to maintain. These buyers however can become so disciplined that they end up passing (or losing out) on opportunities that would become incredible deals if only they acted in a manner more consistent with their intent.
As a Realtor in Edmonton, I try to help people make good real estate decisions. Our office offers home buyers the information they need to make those good decisions without much guidance required from us as agents. We see some home buyers take several days to pore over the data we provide in an attempt to understand as much about the size, location, condition and sale date/price of the comparable sales which is used to compare to the subject property and come up with some type of value. Many buyers then discount their own findings by trying to build in a ‘negotiation buffer’ so they offer somewhat less than what they would ultimately be willing to pay for a property that they’ve identified as good value. But by taking the time to review everything from comparable sales to how many cars drive up your street on a Sunday morning can and often does result in someone else taking your deal before you do.
If your intent is to achieve good value on the purchase price, here are some things to keep in mind:
There are others who want your deal! If you’ve been shopping for a while and if you can now identify good value remember that others can too. There’s no time to conduct ALL of the due diligence you can do once you’ve got an accepted offer from the seller. Take action! Make your offer first, then worry about the Sunday morning traffic count.
The price you pay is very important and you should absolutely have a ceiling – beyond a certain point there’s just no more value. But determining that point has ZERO to do with the sellers’ asking price and EVERYTHING to do with the value of the property. Know the value and base what you’re willing to pay on the value not the price.
Understand the direction of the market. If you’re lucky enough to be buying in a down market you have circumstances working in your favor which are beyond your control. The fear placed with other buyers will keep them away allowing you to do your deal without outside interference. The fear felt by the seller is something you’re likely acting on without even knowing it. Down markets don’t normally last long so pay attention to the amount of inventory available as a leading indicator of future direction.
If you’re acting in an up market, you’ll need to move quickly. But you can strengthen your offer by making it more compelling to the seller. Drop any conditions you can and the conditions you need should be a short a possible. Be pre-approved and know that your financing is in place before you shop and this way when you find your property of value you’ll be in a better position to buy.
If your intent is to achieve good value as a wholesale buyer prepare yourself as such. Many of the retail processes will simply be impossible to work in if wholesale pricing is desired.