The word "bargain" is not defined the same by all, and there may be reasons not initially clear as to why a home is priced low.
My advice is to always do your research upfront. If a home has been on the market for a very long time, it might be overpriced, or there may be other factors, such as a foundation issue, mold, floor plan flaws or a prior history of ongoing concerns. In doing your due diligence, find out if the home has fallen out of escrow previously and, if so, what the reasons were for the buyer backing out.
Check the title report. Check for building permits and certificates of occupancy. Get a detailed report of any work that was done at the property in the past 36 months. By reviewing a complete report of the home improvements made, you might discover areas of concern or perhaps repairs that were made haphazardly to mask a real issue that was never addressed properly. Get the seller to fill out a complete seller's disclosure.
Ask for any previous inspection reports that the owner is aware of. Review the reports, and do a complete inspection of the property yourself, which might even include an inspection of structure, environment, chimney, sewer, roof, foundation, drainage, electrical, plumbing and mold. Some inspection agencies will combine several of these in one report.
Once you have determined the true condition of the home, review the comparable sales carefully. Look not only at square footage, lot size and condition but also the floor plan, potential for remodel, backyard, accessibility, appeal, neighboring influences, privacy, security, traffic and schools. Is the street well-maintained, quiet and desirable? What kind of price adjustments will you need to make one day when you decide to sell?
Is the home two doors away from a body shop or gas station? How much will you need to adjust if you are in a hurry to sell four years from now, perhaps at a time when there is more inventory and there are fewer buyers?
Now ask yourself, "Is it still a bargain?"
Best and Worst Times to Submit a Low Offer
There always seems to be a temptation to submit a low offer the day after a huge price reduction, but I can think of no worse time to get a seller's attention. There are two times in the marketing process when sellers typically have big hopes and expectations. The first time is when they are going on the market. They have worked for several months painting, cleaning, staging and preparing; they have chosen a good agent, reviewed the comparable sales and checked neighborhood open houses, and they feel totally in the driver's seat.
They are hoping to sell their home in a week at the asking price, or maybe above it, if they are fortunate enough to have multiple bids. Then you come along and offer them 10% below their listing price. They are in shock, offended and maybe even so upset they refuse to make a counteroffer. It's rare to get a low offer accepted in the first week, but you can try. The downside is it may not sit well with the sellers, and later they will need to understand that your offer was based on your finances and was not intended to offend them.
The other time when sellers' expectations are high is just after a major price reduction. Similarly, the sellers expect that with the newly adjusted, attractive pricing, their home will fly off the shelf. You will probably need the new price to marinate a while until they realize that even with the new price, their home is not a bargain and they probably will need to negotiate further. The best time to give a low offer is when sellers come to the realization that the adjusted price is now in the range to attract an offer and the original price was not even close. From here it boils down to the sellers' level of motivation and how urgently they need a quick sale.
For more information, please call Ron Wynn at 310-963-9944, or email him at [email protected] To find out more about Ron and read his past columns, please visit the Creators Syndicate webpage at www.creators.com.
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