Tips on the art of home purchase offers

Low price doesn't always win in slow market

By Dian Hymer*
Inman News

Home buyers now have more negotiating power than they have had in years. However, that doesn't necessarily make it easier to decide how much to offer.

The goal is to buy the property at the best price and on the best terms. But, you don't necessarily get there by offering a very low price.

One agent was ushered to the front door when he presented an offer for a buyer who thought there was no harm offering way less than the asking price. The seller was insulted by the buyer's very low offer.

After much encouragement by his listing agent, the seller finally issued a counteroffer. But the episode didn't sit well with the seller who was less than cooperative throughout the transaction.

Another seller who received a very low offer debated long and hard about whether to counter the offer at all. He was inclined to reject the offer and tell the buyers to make another offer if they really wanted the house. He ended up countering at a price that was close to the asking price to send the message to the buyer that he wasn't giving his house away.

Some buyers, particularly in the current market, don't want to make an initial offer that's close to the top price they're willing or able to pay. They feel that if they do so, they'll have little room to bargain. You don't necessarily need a lot of bargaining leeway to strike a deal. If you start off with a price that is relatively close to the list price, you can stand firm or counter back at your best price along with a take-it-or-leave-it message. Just as a seller can decide not to sell if the price is too low, buyers can decide not to buy unless the price is right.

HOUSE HUNTING TIP: Ultimately, your decision about what price to offer should be based on a careful analysis of your own financial situation. Other considerations are how well the house is priced for the market, current market conditions and anything you can learn about the seller's motivation level.

In some markets, there's a wide range of pricing strategies. Sellers who understand the current market and who want their listing to sell within months and not years, price competitively. Other sellers with unrealistic expectations over price their homes, thinking their property has appreciation more than it has. In most areas, appreciation is flat at best compared to a year ago.

Study the market carefully by looking at any listing that might suit your needs. Keep track of what these listings sell for so that you'll be able to determine if a home is priced right or is overpriced for the market.

Even in the current market, there are times when the right offer price might be more than the list price. Buyers recently paid over the asking price on a well priced listing. The seller, who had already bought another property, listed her home for $35,000 less than the more recent comparable sale in the neighborhood. The buyers recognized a good deal and offered to pay $10,000 more than the list price so that the seller would sell to them and not keep the listing on the market until more offers showed up.

The seller had hoped that her competitive price would generate multiple offers and a higher price. But she was sufficiently intrigued by the over-asking price offer that she accepted it.

THE CLOSING: Your offer should be good enough price wise to catch the seller's attention. But, it shouldn't be for more than you can afford, and it should be justifiable given current market conditions.

* Dian Hymer is author of "House Hunting, The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide," Chronicle Books.

happy holidays!

Dear Friends,

Happy Holidays to all! We want to express our appreciation to you for placing your business and trust with us for your real estate needs. Our team has grown significantly this year, thanks to all of you, our wonderful clients.

We would like to introduce to you our newest Team member, our fulltime manager, Yasir Malik. Yasir is an outstanding asset to our Team, and has in depth technical skill as well as an eagerness to be of assistance to you at any time. He has helped redesign our website, and if you have not visited us online recently, we encourage you to see the changes we’ve made at www.BarbandJenny.com. Please be sure to check out this new blog consistently for an up-to-the-minute status of the local real estate market!

As you all know, the year 2006 has been a year of transition between seller and buyer markets, tilting towards the buyers for the first year since 2000. While many may view 2006 a “bust” for sellers, it still remains the 3^rd best year on record for home sales! A renowned author and real estate’s foremost leader in economic forecasting and strategic planning has this to say: “There will be a few selected metropolitan areas where the economy is so good and housing so under built that the boom will continue, albeit at a slower pace. The Washington-Baltimore metropolitan area is such a market. Already a full beneficiary of the boom, Washington will continue to grow as Federal spending continues to increase”** “The lessons here are clear: Don’t look at the housing market nationally, look at it locally. Employment and population change will shape local markets.” If you would like to read the full article, please give us a call!

Our goal for 2007 is to help 75 families buy a new home and/or sell their existing home. If you know of anyone who might need our services, please forward this letter to them on our behalf (just click the email link below and forward them) or have them email us at Barb@BarbandJenny.com or Jenny@BarbandJenny.com.

Once again, thank you for placing your business and trust with The Mother-Daughter Team.

Have a safe and warm Holiday season!

Barb White Adkins, Jennifer White & Yasir Malik

THE MOTHER DAUGHTER TEAM

Real estate's wild ride

3 tips

If you bought McMansion recently, it might be looking like a big McStake. If you're buying one, however, you're in command. Either way, every move counts:

SCORE A FREEBIE Skip the big appliances some desperate developers are giving away. Get them to pay your mortgage for a year, as some Florida developers are.

SPRUCE UP SMART A new bathroom or sun porch won't recoup value as much when you sell as will cosmetic touches like a new tree, a fresh coat of pain, or curb appeal.

PROTECT PROFITS Thinking of selling? You can use put options on housing futures - which appreciate when prices fall - as insurance against price drops. For example, a Boston seller could have recently bought five $750 puts (they're sold by stockbrokers and priced by city) for $3,750. If houses in Beantown dropped 20% the puts would grow to 22,100 taking some of the sting out of a lower asking price.

Time to Buy..

WASHINGTON D.C. - Existing-home sales are expected to rise gradually in 2007 from current levels, with annual totals comparable to 2006, while new-home sales will continue to slide according to the latest forecast by the National Association of Realtors.

David Lereah, NAR's chief economist, said there are mixed conditions around the United States. "Roughly three-quarters of the country will experience a sluggish expansion in 2007, while other areas should continue to contract for at least part of the year," he said. "Most of the correction in home prices is behind us, but general gains in value next year will be modest by historical standards."

"Buyers especially first-time buyers, with the combined benefits of seller flexibility and an unexpected drop in mortgage interest rates, have a window of opportunity. These conditions will persist in many areas until early spring when inventory supplies are likely to become more balanced," Lereah said.

Existing-home sales, finishing the third-best year on record, are projected for 2006 at 6.47 million, a decline of 8.6 percent. In 2007, they're expected to rise steadily from the current cyclical low and reach an annual total of 6.40 million, which would be 1.0 percent lower than this year's total.

"By the fourth quarter of 2007, existing-home sales will be 4.6 percent higher than the current quarter," Lereah said.

It's a great time to buy or sell a home.

Right now may actually be one of the best times to buy a home. Consider these facts:

• INTEREST RATES NEAR RECORD LOWS
• Today's interest rates are comparable to 40-year lows, offering homebuyers a once-in-a-lifetime opportunity
• LARGE INVENTORY WON'T LAST
• There are currently 3.75 million homes for sale. We have had a record inventory of homes on the market in recent months, offering consumers the greatest choice in decades
• HOUSING PRICES WILL POST GAINS IN 2007
• Housing prices are forecast to post gains in 2007, surpassing median home sales values in 2006
  
• POSITIVE OUTLOOK
• Former Federal Chair Alan Greenspan recently said that housing prospects are looking up. "Most of the negatives in housing are probably behind us. The fourth quarter should be reasonably good, certainly better than the third quarter." According to industry estimates, 2006 will be the third-best year on record for home sales.
  
• REAL ESTATE IS A GREAT INVESTMENT
• Homeownership is a safe, secure way to build long-term wealth. The national median price of homes bought ten years ago has increased 88 percent. The number of US households is expected to increase 15 percent during the next decade, creating a continued high demand for housing.
  
• DON'T DELAY
• Now is a great time to buy or sell a home. So if you are planning, seize this opportunity.

Existing Homes Sales in 2007 Expected to Recover From Cyclical Low

by Waltor Molony

NAR, WASHINGTON, December 11, 2006

Existing-home sales are expected to rise gradually in 2007 from current levels, with annual totals comparable to 2006, while new-home sales will continue to slide, according to the latest forecast by the National Association of Realtors®.

David Lereah, NAR’s chief economist, said there are mixed conditions around the United States. “Roughly three-quarters of the country will experience a sluggish expansion in 2007, while other areas should continue to contract for at least part of the year,” he said. “Most of the correction in home prices is behind us, but general gains in value next year will be modest by historical standards.”

“Buyers, especially first-time buyers, with the combined benefits of seller flexibility and an unexpected drop in mortgage interest rates, have a window of opportunity. These conditions will persist in many areas until early spring when inventory supplies are likely to become more balanced,” Lereah said.

Existing-home sales, finishing the third-best year on record, are projected for 2006 at 6.47 million, a decline of 8.6 percent. In 2007, they’re expected to rise steadily from the current cyclical low and reach an annual total of 6.40 million, which would be 1.0 percent lower than this year’s total.

“By the fourth quarter of 2007, existing-home sales will be 4.6 percent higher than the current quarter,” Lereah said.

New-home sales in 2006 are expected to fall 17.7 percent to 1.06 million, the fourth highest total on record, before sliding an additional 9.4 percent in 2007 to 957,000. Much of the contraction in the new housing market results from cuts in builder construction to support pricing for current inventories. In addition, high construction costs in many areas are minimizing potential profits.

Total housing starts for 2006 are likely to drop 12.3 percent to 1.82 million units, with another 15.1 percent decline in 2007 to 1.54 million.

The 30-year fixed-rate mortgage is forecast to gradually increase to 6.7 percent by the fourth quarter of 2007. Last week, Freddie Mac reported the 30-year fixed rate dropped to 6.11 percent.

The national median existing-home price for all of 2006 is projected to rise 1.4 percent to $222,600, with another 1.0 percent gain next year to $224,700. The median new-home price should ease by 0.5 percent to $239,700 this year, then rise by 0.8 percent in 2007 to $241,700.

“Keep in mind that overall home prices were still appreciating at double digit rates in the first quarter of this year – prices in this buyer’s market are temporarily a little below a year ago when we were in a strong seller’s market,” Lereah said. “This correction is one of the factors drawing buyers into the current market, but most sellers are still seeing very healthy long-term gains.”

The unemployment rate is expected to be 4.8 percent in 2007, after averaging an estimated 4.6 percent this year. Inflation, as measured by the Consumer Price Index, is forecast to be 3.4 percent for 2006 and 2.3 percent in 2007, while growth in the U.S. gross domestic product is likely to be 3.3 percent for all of this year and 2.3 percent in 2007. Inflation-adjusted disposable personal income is projected to grow 2.6 percent for 2006 and 3.5 percent next year.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.

# # #

Existing-home sales for November will be released December 28; the Pending Home Sales Index is scheduled for January 5 and the next forecast will be January 10.

Ideal for Buyers

WASHINGTON, D.C. - Conditions for home buyers improved during the third quarter as existing single-family home prices in many metropolitan areas experienced corrections, and most states saw sales activity below a year ago which helped to build housing inventories, according to the latest quarterly surveys by the National Association of Realtors.
Total state existing-home sales, including single-family and condo, were at a seasonally adjusted annual rate1 of 6.27 million units in the third quarter, down 12.7 percent from a 7.18 million-unit pace in the third quarter of 2005 – the second highest level on record, after a peak of 7.19 million in the second quarter of last year. Even with the overall decline, 10 states showed increases in sales activity from a year ago.

Third-quarter metro area single-family home prices, examining changes in 148 metropolitan statistical areas, 2 show 102 areas had price gains, including
21 metros with double-digit annual increases, and 45 areas experiencing price declines; one was unchanged.

David Lereah, NAR’s chief economist, said market conditions are nearly the opposite of a year ago. “Last year we had a record sales market and historically tight supplies of homes with buyers bidding over the asking price,” he said. “With the market in full transition, buyers now have choices and sellers are more willing to negotiate – under these circumstances it’s no surprise that overall home prices are slightly below a year ago. We expect this trend to continue in the months ahead, but we’ll see modest appreciation in most of the country in 2007.”