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Buyers holding more cards in changing housing market
By Broderick Perkins
Silicon Valley homebuyers are in the best negotiating position they've been in for years.
The median price for Silicon Valley's existing single-family homes lost $50,000 during the period from July through August, inventories were up 38 percent over the past 12 months and homes take weeks longer to sell than they did a year ago.
While they don't yet hold all the cards, the deck is stacked in buyers' favor.
"Sellers are getting desperate now because they have been programmed that their house will sell in a week. The buyers smell blood, but watch out. In Silicon Valley, the sellers still have a card or two to play," said Mark K. Hicks, a mortgage and real estate broker with Seabrooke Group in Campbell.
Timing is also giving buyers an edge. The market is entering the traditional buying cycle when fewer buyers are in the market. Sellers who are aware of the seasonal dip in buyers and come to market anyway are typically more motivated to sell. That means they are more willing to negotiate.
"What I'm noticing is that nearly nothing is selling unless it is 'the value' out there. That is, it really needs to look like a good deal--and then we are still seeing multiple offers, but they don't always push the price a lot higher than list. I believe prices are slipping slightly because these value-priced homes are lowering the price ranges just slightly," said Mary Pope-Handy, a real estate agent with Intero Real Estate in Los Gatos.
According to Pope-Handy, Hicks and others in the know, here's how buyers should play their hand.
* Learn the game. Obtaining general knowledge about the home-buying process and the real estate market is a relatively easy task, but buyers who feel a competitive edge tend to leap before they look.
A glut of information available from the Internet, the media, free real estate industry-sponsored seminars and workshops and through a vast library of real estate guide books can give you an edge. The experience of a real estate agent can also be better than the bluff.
"The key is education. A smart buyer or investor should seek the counsel of agents who have at least 10 years experience in the business. This knowledge will be priceless based on the fact that they have been through this before and have history on their side," said Hicks.
* Check the table. Real estate markets are local, and that means so is a buyers' market. Markets can be small communities, larger regions or greater geographic areas. A buyers' market typically is also spotty, occurring in some neighborhoods but not others, or appearing first in one area and then spreading to others. Waiting for the right price may not always be the best strategy.
"Buyers waiting for prices to drop may have to deal with increasing interest rates. If they are planning on hanging on long term, prices will end up going up again, and if they have a long-term lower rate locked in, they will save money in the long run," said Daunielle Doughty, a real estate agent with Intero's San Jose office.
* Don't deal from the bottom of the deck. Uneducated buyers in a buyers' market tend to low-ball sellers and ask for too many concessions. That could alienate the seller, especially those less motivated with top-value homes. The seller will simply seek a more reasonable buyer.
"Don't lose a good opportunity just because you think you have to bargain. Sometimes a motivated seller has priced the home below market," said Janet Houde, an independent real estate broker and past president of the Santa Clara County Association of Realtors.
* Don't give away your hand. Paying sellers' market prices in a buyers' market also is a common mistake buyers make, especially at the onset of a buyers' market. The mistake could leave you with a home that immediately loses value. Get comparables, visit open houses, track home sale prices in your shopping area, use the local newspaper, online listing sites and other sources to keep tabs on asking prices.
* Play smart. Buy the least expensive house on the best block. Buy into the least expensive neighborhood in the best community. The strategy will give you the greatest return on your investment, especially when the market rebounds.
* Play with a full deck. Don't let a false sense of power overcome you. Even motivated sellers aren't going to wait around for your money to show up. Get your credit report checked and in order. Get your loan pre-approved. Lock in your mortgage rate.
"A motivated seller who has priced his home below market price for a quick sale is more likely to give a bigger and better concession to a fully qualified, pre-approved buyer than any other buyer," said Rob Roham broker/owner of RE/MAX Advisors in San Jose.
* Play for keeps. Buy because you need a home, not because it's a buyers' market. Speculators and short-term investors are bailing out for good reason. Right now it's also a keepers' market.
* Play another game. Renting now and waiting out the market is a gambit, but so is buying a home right now if you don't think you can stay put long enough to weather the change. Renting could pay off, over time, in a buyers' market that hasn't bottomed.
Real estate writer Broderick Perkins, executive editor of San Jose-based DeadlineNews.Com, writes regularly for this newspaper.
