Smart Moves by Ellen James Martin

Bidding for a House, on a Serious Tip

It’s a time of conflicting signals for homebuyers. A decade after the nation’s real estate crash, property prices in popular areas are still rising and home loan rates are ascendant.

“The positive forces of faster growth and steady hiring are being met by the negative forces of higher home prices and mortgage rates,” says Lawrence Yun, chief economist for the National Association of Realtors (realtor.org).

Still, Yun and other housing economists say the skies are very gradually brightening for those motivated to buy a property in the coming months.

“It’s possible the worst of the supply crunch affecting most of the country has passed,” says Yun, noting that in June the level of housing inventory was up slightly for the first time in three years. Plus, several major metro areas are now witnessing jumps in supply.

At this point in the real estate cycle, overall demand for homes is slipping. But as always, there are some diehard buyers who are undaunted by rising mortgage rates, which are still very low. These determined buyers include millennial couples who wish to own for the first time and families with an urge to trade up to larger quarters.

“We Americans are pretty terrible at delayed gratification. ... If we want better housing, we don’t take kindly to a long wait to make those dreams come true,” says Mark Nash, a longtime real estate broker and author of “1001 Tips for Buying and Selling a Home.”

But he says buyers who prevail are those who stay focused on their goals in the home selection process and also take a strategic approach to bidding.

Here are a few pointers for buyers:

-- Seek to assess the sellers’ equity position.

Eve Alexander, a broker who deals exclusively with buyers, says it’s critical for buyers to gather as much information on the sellers as is readily available before bidding on any home.

“What you’re looking for are insights into the mindset of the sellers,” Alexander says.

One source of clues on the owners’ equity position can be found by searching local government land records. These records (usually available online) should tell you when the current owners purchased the place and the original price they paid.

“If the sellers brought the house a couple of decades ago and haven’t refinanced, they should have a lot more equity than if they bought it in a strong market just a few years ago,” Alexander says.

-- Ask your agent to query the listing agent.

When owners have an urgent need to sell, it’s normally against their interest for that information to be broadcast to the world. Even so, Alexander says many listing agents will readily disclose such client information in response to questions.

“You’d be amazed how much listing agents will divulge to a buyer’s agent. For example, they might blab about how the seller must move due to divorce or a job transfer,” she says.

-- Identify and rule out sellers who are simply testing the market.

Eric Tyson, co-author of “Home Buying for Dummies,” says that in all markets, including the current one, there are sellers who won’t budge from an unrealistically high price because they’re in no rush to move.

“Right now, there are surprisingly many indifferent sellers out there,” he says.

How can you tell which sellers are merely testing the market and will never negotiate seriously with anyone who bids less than their lofty list price?

Tyson recommends you ask your agent to find out if previous offers have come in on the property you want. If the owners have already rebuffed one or more fair offers without so much as a counterbid, this indicates they’ll probably resist reason with you, too.

The good news for buyers is that information on past offers is often readily available through the listing agent.

“Agents are inherently outgoing people. Some have very loose lips and will talk candidly about their clients’ negotiating position and whether it’s worth your while to make a bid that’s well under an excessive asking price,” he says.

While there’s no harm in trying to reason with market testers, Tyson says you can waste a lot of time and energy trying to budge people who won’t even entertain a fair offer. Better to look for someone who’s eager to sell.

“Finding the hungry home seller is the key to getting an extraordinary price,” Tyson says.

If you’re planning to buy in a neighborhood with widely varied properties, it’s helpful to compare the homes on your list on a price-per-square-foot basis. Then adjust for differences in size and home features, such as a larger garage.

“Start with 10 comparable homes and then work your way down to the five most similar ones,” Alexander says.

After estimating the current market value of the place you wish to buy, it’s time to decide how aggressive an offer to make. Alexander says that will depend on how enamored you are with the home.

“You won’t want to push the limits if you’ve fallen in love with the property and feel it’s a ‘do or die’ situation,” she says.

On the other hand, you might choose to make a lower offer if there are other available homes in the neighborhood that would meet your needs equally well.

“It’s always easier to negotiate without emotion if you can find second and third choice houses you also like,” Alexander says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)