|
If you are lucky, your buyer has found the
perfect home and has fallen in love with it.
Because this rarely happens, one must be prepared to view a home choice
as a compromise. The very best home
probably will not be absolutely perfect in every respect.
Unscientific studies have proven conclusively that most buyers would find
true happiness in a home priced $100,000 above their upper price limit.
But your buyer is stuck in the real world with a real choice to make, and
it probably will not be easy. As your buyer considers various properties, suggest that major importance be assigned to the unchangeable features of the home, for example, the location, the style, and the lot size. Of less importance are the changeable features, the missing deck, or the decorating that makes one gag. Even hardwood floors, a fireplace, and sometimes a garage can be added, if required, to an otherwise suitable home. Many opt not to buy the typical home.
There are many excellent values in non-typical homes.
Many buyers do not need four bedrooms, and two and a half baths.
They might not need a garage. So
why should your buyer pay for what he does not need? The market will not be living in this home
every day or paying the mortgage payment every month.
It is a very personal decision, so respect this fact.
But your buyer should consciously consider where the mainstream of the
market is flowing and whether or not the typical home is right for him.
It is part of the compromise process. If your buyer is considering a new home,
there will be questions about the builder.
New homes are constructed in conformance with voluminous building codes
and are inspected by local authorities during the construction process. While this does not ensure that every new home is perfect, it
does establish basic minimum standards. It
is likely that most new homes will still be standing years after construction.
An important factor to investigate is the builder’s attention to
finishing detail. How carefully
done are the trim woodwork, the painting, the installed fixtures, and the
flooring. If care was taken on
these items, it is likely that what is underneath is also acceptable.
Does the builder keep delivery promises? Is there any time limit or guarantee? But remember, the builder wants to go to closing just as much
as your buyer... probably something to do with getting paid.
Ask about prompt courteous service after the sale.
This can be more important than a written warranty.
The builder’s sales agent surely will have all the answers.
Your buyer should verify the agent’s claims by talking to a few of
those who have already moved into the builder’s new homes. If your buyer does opt for a new home, encourage him to
retain a home inspector for a final inspection.
Discuss this with the builder up front.
You might want the inspection to be mentioned in the contract. In any complex and important decision, the
key to success is assembling the pertinent information.
As a home choice decision nears, a seemingly endless series of questions
might pop into your buyer’s mind. Take
each one seriously. Take a moment
with each question to ask where the answer best can be found: To whom should the
question be directed? It might seem
natural to ask the seller of the home or a real estate agent about the quality
of the local schools or about the vacant land adjacent to the property or the
crime rate. But this is the easy
way out, and one can often be misled quite unintentionally. Be sure that your buyer addresses any
important questions directly to those with the answers.
If schools are important, your buyer should visit them; talk to teachers,
administrators, parents, and students; collect published information and make a
judgment. Ownership of vacant land
is best determined through local governments: They have to know who gets the
real estate tax bill. An obvious
source for information on crime is the local police.
If they do not have the facts, no one else will.
These are just a few examples. If
your buyer has an important question, be sure to get the right answer.
He should go to the source and talk to the experts.
One would not ask a teacher to help find a home, so why ask a real estate
agent about schools? Alternatively,
if a question is not that important, do not pursue an answer that does not
matter anyway. Gather information for all of the properties in the areas or subdivisions containing each home on your buyer’s short-list, sold properties as well as available ones. There is a wealth of important information here. Does the price your buyer is likely to pay fit in with the information on similar sold properties? Is the home he is considering the most expensive or least expensive home in the area? Least expensive is better, but if the home in question is not more than about 10% above the top of the range, there should be no reason to worry. As
you are considering your buyer’s offer, take a second to reflect on the
valuable service that you have been providing to your seller clients from the
beginning of time. Almost every
potential seller client expects and receives a market analysis so that he can
define what his property is worth. If
the climate of your market permits, you can greatly increase your value to your
buyer by providing a market analysis on his home of choice at this critical
stage. While this may not be a
common practice your area, it is strongly recommended if you are acting as a
buyer-broker. Calculate
the number of month’s supply of homes on the market (see previous issues) for
each area under consideration. Compare
the months supply figures you have calculated for each area. Lower numbers indicate that homes in that area are selling
well. This indicates that sellers
who are aware of this fact might be somewhat less negotiable.
A lower number could be advantageous if the area’s popularity continues
until it is time for your buyer to sell. Higher
months supply figures mean sales are sluggish.
This might be noted to your advantage during negotiations with the
seller. But recognize that your
calculations are based on a very small number of available and sold homes; your
results provide only a coarse analytical tool.
For example, the difference between a 5 months supply and a 6 months
supply might be meaningless, but perform this calculation for your buyer and
utilize the information if applicable. If your buyer is considering a townhome or
condominium, there might be concerns about the stability of the complex, that
is, the number of units that turn over in a year.
Of course these numbers can vary from time to time. Add the number of units sold in the past year to the number
of units rented in the past year. Divide
that sum (the number of units changing hands in the past year) by the total
number of units in the complex your buyer is considering.
The result is the annual percent turnover.
Compare such figures for each complex being considered in order to get an
idea of resident stability. With a
condominium, your buyer’s lender probably will investigate the percentage of
units that are rented. Too high a
proportion of rented units will make a lender hesitant to lend mortgage money
for that location. This usually is
not a problem, but investigation might be in order at an early stage. One final aid to help your buyer in paring
the short-list down to one or two homes: Try the “Ben Franklin approach.”
Using a sheet of paper or a computer spreadsheet, list advantages on the
left, disadvantages on the right. Consider
the relative importance of each factor listed, giving more weight to the
important items. With a little
luck, your buyer is now ready to make an offer on his next home.
If he cannot make a decision between the last two homes on the list, flip
a coin and forge ahead. With two
equally suitable homes, your buyer is in a superb negotiating position. The choice of a home is a very important decision and should not be rushed. But once the choice is made, proceed without delay. Keep in mind that other active buyers probably share your buyer’s home preferences and market knowledge. The home he has carefully selected will also appeal to them. The risk in delaying an offer or stalling during negotiations is that another buyer will crawl out of the woodwork and make an offer on the home. Do not discount this risk. It happens more often than anyone would guess, even in a soft market when a home has been on the market for many months. Neither you nor your buyer needs the aggravation of competing with others to buy the home of his choice, and you do not want to start from “GO.” Act now. |
