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We all love getting a good deal, particularly in this economic climate. Whether you're saving 75 cents on a bag of frozen french fries or $5,000 on a new home, frugality is in. That's the idea behind "Real Estate on the Cheap," a new monthly feature on MSN Real Estate.
Each month, we'll talk about a budget-friendly topic or tactic, then share insight from a real-estate agent about how to bargain shop in a particular market. We'll also share your suggestions and answer your questions about budget-friendly real estate.
The art of the lowball offer
To kick it off, let's talk about that all-important step after you've found your dream home: submitting the offer.
If you're following the numbers, you're probably aware that most U.S. markets still favor homebuyers. That may lead you to believe that sellers are desperate and will take any offer you throw at them.
You'd be wrong.
While sellers may be more willing to negotiate now than they were in 2006, for instance, you still must perfect the art of the lowball offer. The key is research. Northern California real-estate agent Michael Byrd says you must know everything about the market, the property, the seller and yourself.
The market: There is no such thing as a national real-estate market, which means all this talk of a buyers market may not even apply where you live. Your real-estate agent can find out whether comparable homes are selling quickly or slowly and at, above or below asking price.
The property: How does the price of the property compare with those of comparable homes? How long has the home been on the market? The longer it has been listed, the more likely the seller may be to entertain lower offers.
"If it has been on the market for months or even years and there have been no offers, at some point the seller is going to give up and either accept a much lower price or just resolve not to sell it," Byrd says.
Another factor is whether the home will require a lot of work, says Dorcas Helfant-Browning, a real-estate agent at Coldwell Banker in Virginia Beach, Va.
"One house had a tarp over the roof, and a lot of investors were avoiding it because they didn't want to deal with it," she says. "I had a group make a low offer, and it was accepted."
If you're willing to do the work, you can generally find good deals on fixer-uppers, Helfant-Browning says.
The seller: If sellers already have purchased another home or are starting a job in a new city and must sell quickly, that will affect their willingness to settle for less. Being flexible on the terms of a contract also can translate into a lower price, Byrd says.
"For example, if the seller plans to move to a new home still under construction, he might accept a lower price in return for a rent-back agreement allowing him to stay in the home for some period after closing," Byrd says.
Yourself: Are you in love with the house or with getting a good deal?
"If the former, (the buyer) would probably want to offer something closer to market value in order to lock it up, particularly if it's in a market with intense buyer competition," Byrd says. "If the latter, she might take a shot at whatever she thinks is in the lower hemisphere of fair and see how things develop."
In Byrd's opinion, a buyer's best bet for finding a great deal is to buy a short-sale property. That said, you must be sure you're cut out for what is usually a long, difficult process.
You can get a bargain when buying a foreclosure, but Byrd says that those homes are priced based on what is owed to the bank, not on their actual value.
If you're looking at a distressed property, be realistic about whether you can handle buying a property "as is." If you've never picked up a hammer, the money you save on the purchase may not be worth the hassle and expense of hiring contractors to make updates — or even to make the home livable.
