Negotiate as defined by Merriam-Webster is to confer with another to arrive at the settlement of some matter. The hunter has done their homework and found the perfect abode, the one he/she cannot live without, and the excitement builds. He/she has their Realtor write an offer they sign and submit to the Seller’s agent and wait. Sometimes word gets back fast or drags on seeming like an eternity. When it does arrive, the offer is not in the form of a contract but a counter offer. The counter is a good thing; it means the original offer is not too low. If the price is much lower then what the Seller is expecting he may just reject the offer and ask the Buyer to submit another more reasonable offer. However, the counter means you are in the game and now the fun starts. Everything in the offer is negotiable; however, in Texas, a few things are customary for the Seller to purchase, such as title insurance and a home warranty. When buying a house the Purchaser is not actually purchasing the property, he /she are buying a title to the abode, the right to occupy and use the space. Title insurance protects the document from claims and limitations placed on the title by others. This can save the Buyer a lot of heartache and financial loss. The home warranty is a one-year contract with a home warranty company and is different from homeowner’s insurance in that the warranty covers major appliances such as air conditioners, heaters, pools, and plumbing fixtures etc.
The typical negotiation points in an offer are price, repairs, closing costs, survey, closing date, and possession. Sometimes the option period is included and on rare occasions, escrow/earnest money. In order to determine a reasonable offer price, a good Realtor will perform a comprehensive market analysis (CMA/comp). This is the same procedure used by the Seller’s agent to set a price on the home so makes sense for the Shopper to do the same. A CMA compares similar properties in the same or comparable neighborhoods that recently sold, and averaging price per square foot of the abode. The house hunter will have a better understanding of the market value. Market value is a very important concept to understand when purchasing. Market value is the cash price that a willing buyer and a willing seller would freely agree upon, given reasonable exposure of the property to the marketplace, full information, and no undue compulsion to act.
The goal in all negotiations to find the true market value and this is hard, because many times the Seller has an over inflated assessment of his/her castle and on the other side the Buyer is unrealistic. A good house-hunting guide educates the Client while showing listings and explains the price differences of listings and coaches the Consumer on pricing. Sometimes repairs are needed and often are negotiated twice, once at the initial offer and a second time during the option period after a home inspection. Safety hazards are the number one concern for Buyers; these repairs are typically accepted by the owner, others such as updating and taste, not so much. Closing costs are also on the table. Certain loans have particular limitations on how much a Seller can contribute to closing costs. The well-informed house hunter must be aware requesting payment of closing costs reduces the overall bottom line of the house for the Seller, when negotiating both need consideration. The survey is required by the Title Company, sometimes the Seller has a copy of a good survey the Title Company can use, however if the owner has changed the foot print of his abode or has added a permanent fixture to the yard then a new survey is required. The time to close takes at least twenty-one days but depends on the lender or the type of purchase. Cash for instance quickens the closing time. Possession after closing depends on if the Seller requires more time to vacate the property. The option period is the time allowed by the Seller in which the Buyer can get out of the contract and not lose his/her escrow/earnest money. Typically, the length is ten days at a minimal cost. Escrow/earnest money guarantees the Buyer will come to the closing table; the cost is normally $1,000 per $100,000 of price, and both money for the option period and escrow/earnest money refunded at the closing table.
The current tight housing market has created the semi-new phenomena of multiple offers. In this case, several Buyers are after one castle and the Seller has many offers to consider. This almost creates a bidding situation however a Realtor is not a licensed auctioneer and it is illegal for them to create an auction, so the Seller’s agent cannot give the price of the highest offer to another Purchaser. Multiple offers create a nerve-wracking circumstance for house hunters and true market values can go out the window. Although, if he/she loves the house and no others are available, the Buyer may be tempted to offer a price above market value. If the Client is using cash, there is no problem, but when a loan is involved, especially FHA and VA loans then the house-hunter could find themselves with a low appraisal. The lending institute financing the loan typically does an appraisal of the home’s value to determine if the abode purchased provides enough collateral for the loan. If the loan is higher than the lenders appraised market value of the house, either the Buyer or the Seller must pay the difference. The house hunter may not have enough cash so it falls onto the Seller to lower her/his price. If this does not happen, the deal is dead.
Negotiations do not need to be difficult. As long as both parties are realistic and have good representation, this portion of the real estate process should be easy. One good hint for all potential house hunters is to be emotionally unattached to the abode prior to closing, easier said than done, but can produce a smarter purchase. See ya down the road. http://www.djlyons-realtor.com
So, what is going on in the Real Estate market, why all the hubbub of not enough listings and buyers pulling their hair out trying to find a home to purchase? To explain this new phenomenon let us examine February’s numbers generated by the MLS about year to date closing on single-family homes in North Texas. To be more specific I will examine the numbers of three different local markets, Northeast Fort Worth, Keller and Trophy Club.
Northeast Fort Worth is an attractive area for first time buyers and young families. With Alliance Airport and the surrounding industries and business to the excellent school districts including Northwest ISD and Keller ISD, Northeast Fort Worth for many is the place to be. Last month 88 homes in this area sold. This is a 22% change from last year at this date. The average price is $83,985, a 6% increase bringing the average price per square feet to $47. Now if we look at how many new listings this area has, the number is 116. That is down from last year by -26%. Monthly inventory is for 3.7 months down by -33% from last year. With an increase of 22% sold homes and decrease of -26% listings, the picture becomes clearer.
Keller Texas is another very desirable area. With older established homes, larger yards and great schools, Keller is an excellent location for families. Like Northeast Fort Worth, Keller had 88 homes sold last month, a 16% increase from last year. Home price average at $316,263 and a price per square foot of $103, Keller had 208 new listings which is actually an increase of 16% from last year however the monthly inventory is at 3 months, a -46% from last year. That is a very low number meaning there is virtually nothing replacing the current inventory. When you hear Realtors screaming, now is the time to sell, it is no joke. This situation may not last forever. With 88 new sales, Buyers are out shopping.
Trophy Club, north of HWY 114 saw its major growth in the 90’s and early 2000’s. A golf club type community Trophy Club is close to new industrial and business parks. Near DFW airport and within the highly acclaimed Northwest School district makes Trophy Club an excellent place for new families, established families and retired folks to call home. Last month only 34 homes sold an actual decrease of 6%, the average price $348,640 a -41% drop and a price per square foot of $108. Trophy Club only has 72 new listings, a decrease of 8% from last year with inventory for 3.7 months a drop of -45% from last year. The very low number of listings contributed to the poor number of sales last month. If there is no inventory to buy then of course sales will be down, nothing to sell, nothing to buy.
We are in this strange market. Some say this type of market is here to stay for a while, maybe. All I know is for Buyers home shopping has become a blood sport trying to find a home and then placing an offer. Buyers are finding multiple offers, listings going for full price and some going for more than full price. We are in a Seller’s market, the Buyers are in a frenzy and there appears to be no change in the near future. See ya down the road. http://www.djlyons-realtor.com/
You may be considering selling your home soon or maybe in a few months or maybe not interested in selling your home at all yet it is still valuable to know what your house is worth. The market has changed considerably since the last decade. We had a huge drop in prices during the crash of 2007 however 2013 the housing prices have been slowly turning upward. Your home is one of the biggest investments you will ever make so it makes sense to keep track on how much your home is worth on the market. The big question is how do you price a home? Many factors come into play when determining market value.
Many websites provide programs estimating home values. Those are good for a general idea of what your house may be worth however those programs typically take current listing prices on various homes regardless of condition and age in a specific area and calculate the value. Owners can do that themselves and narrow the criteria by choosing listings on Trulia, Zillow or Realtors.com, which most match their current home. This is a good way to determine what price neighbors are trying to get for their home. The problem is the word “trying”. What the home sells for is the true market value of a home and unfortunately owners cannot get access to this information.
Realtors are the best source for determining market value. The Multiple Listing Service (MLS) is a powerful tool for calculating price. In order to get the most accurate value the Realtor will create a Comparative Market Analysis (Comp.). From the MLS the Realtor will choose homes that recently sold (Usually in the last 4-6 months.) by matching age, square footage, number of bedrooms, pools, acreage and condition within an area around your home plus subdivisions similar to the one the subject property is located. The Realtor will average the square footage cost then apply the cost per square foot to the subject home. A good Realtor will also show you recent listings so you can understand what competing properties are doing sometimes revealing how far off they are in market value. They will also show you “expired” listings. This gives you an idea of a price, which did not sell the particular home making this a great reality check. Even if you are not selling your home in the near future, a good Realtor will do this for you at no charge. To them it is a way to make new contacts. If you would like a Comparative Market Analysis for your home just drop me an email at: firstname.lastname@example.org and I would be happy to do one for you.
As mentioned above many factors contribute to home prices. Some you can control others you cannot. For instance, you cannot control where your home is located or age and unless you plan for an addition, square footage, acreage, number of bedrooms and pools you cannot control. Condition is the only controllable aspect so it is always a good idea to keep up with the maintenance of your abode. See ya down the road.