The amount of negotiating a buyer will be able to successfully complete will depend in large part on supply and demand. In our Southern California market, there is still more demand than there is supply of reasonably priced inventory. This means less negotiating room for the buyer.
In today’s market, getting your offer accepted amidst multiple competing offers is a “big win.” I have seen competing offers range from one or two to as many as 23 on one home that was listed about 20 percent under its market value.
In the last year the volume of sales has dropped off, but the median price paid for a home in Southern California rose, up 7.6 percent for the 12-month period ending January 2015. Buyers gained a little more leverage as the pace of sales slowed at the end of the year, but this may not last as demand is typically seasonal and is expected to pick up in the Spring and Summer.
Although sellers are still in the driver’s seat, there are some steps buyers can take to better prepare themselves for a home purchase. Buyers are advised to do some homework before making an offer on a property.
There is a wealth of real estate information on the internet and buyers may be able to locate a home on their own. However, having a good agent who can perform an analysis of recent sales to come up with an accurate fair market value for the desired property and who is experienced at negotiating can be the critical factor in whether or not the buyer closes the transaction.
When it comes to price, if buyer and seller are not too far apart, it may be better for the buyer to step up rather than lose the property. An experienced agent can help a buyer do the math and figure out if there is any significant increase in cost over the term of the loan.
Most sellers will not accept a purchase offer unless it is submitted with proof of funds for the good faith deposit and sufficient funds to close escrow.
Where a loan is involved, there should be a loan pre-approval letter from the buyer’s lending institution or mortgage broker.
Buyers usually learn the hard way how important it is to be prepared before making an offer. After losing out on one or two homes, buyers typically learn how important it is to make a good offer on price while still leaving room for negotiation, along with providing proof of funds and pre-approval letter.
Buyers should keep in mind that when there are multiple offers, a seller may only counter to the top offers. Sometimes if there is one offer that is far superior to the others, a seller may choose only to counter to that one.
Some buyers assume they will be able to renegotiate a deal during an inspection period. In a real estate market that favors the seller, this is not necessarily the case.
Where an inspection reveals repairs are required that were not disclosed by the seller, the buyer can certainly ask the seller for a credit and may be successful.
Sellers in this situation will generally give the buyer some credit towards doing repairs after close of escrow in order to consummate the deal rather than start the process over with another buyer.
For a free courtesy consultation, or information regarding mortgage brokers, contact Bess Hochman, a top Westside Real Estate Broker for more than 20 years. Bess is also distinguished by holding a law degree. This article expresses the opinion of the author. You are advised to consult attorneys and others experts specializing in the issues referenced in this article. Contact Bess by phone at 310.291.4111 or email Bess.CenturyCityNews@yahoo.com.
“Bess is a master negotiator!” says Michael Donaldson, attorney and author of “Negotiating For Dummies”
