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Setting home purchase offer requires quick sorting of variables

What price to pay:
Setting home purchase offer requires quick sorting of variables

One of the ironies of modern American life is that consumers easily can spend more time researching the purchase of a dishwasher than the purchase of a home. The fact that thousands of dishwashers are available for sale, and the consumer’s ability to leisurely compare prices and features leave most feeling confident of the ability to buy wisely.
A home represents a far greater investment of money, time and emotion than an appliance does. Yet rapidly arriving at the perfect bid in order to snap up that dream home in a sought-after neighborhood requires the resources and chutzpah to make a major decision under pressure.
For many buyers, used to relying on the crisp authority of Consumer Reports charts for everything from cars to breakfast cereal, the variable, subjective nature of the information available on a real estate purchase can be paralyzing.
Equally daunting is that buyers are forced to depend heavily on real estate brokers, attorneys, engineers and appraisers–all of whom may be strangers. While many of these professionals are worthy of the uninitiated buyer’s trust, as a group they offer varying degrees of competence and integrity.
Making a confident purchase, real estate experts say, involves carefully screening such professionals, realizing that many safeguards are built into the system to avert major buying mistakes, and never downplaying the importance of one’s own tastes and emotions.
Buyers also must wean themselves of the Consumer Reports mentality, which assumes a glut of comparable models, easily evaluated features and the ability to pit one retailer or manufacturer against another.
Unlike dishwashers, “very few homes ever are identical,” says Glen Peters, a Realtor broker and president of Glen E. Peters Inc. Realtors in Fairport. Even homes on the same street with the same floor plan may be of different ages, in different settings or in different condition.
And, as the area’s economic outlook changes, what a house was worth even six months ago may not be the same now.
An experienced, conscientious broker familiar with the target neighborhood and acting as a buyer’s broker–that agreement must be in writing–will do plenty of homework to determine a fair market value for a house, Peters says. Recent sales of homes in the area provide one important guideline, as do assessment records.
“With some honest skulduggery,” Peters says, “we can come up with a pretty fair price.” Technology has made the process swift, aiding those inclined to act promptly.
Mike Canal, a Realtor broker with ERA Vision Realty Inc. on West Ridge Road, says that, in addition to analyzing recent sales of comparable homes and getting a feel for how the target house stacks up against similar properties currently on the market, a buyer and his or her broker should take note of how long the house has been listed and how high a mortgage balance the seller is carrying–both of which are standard on Multiple Listing Service entries.
“If sellers have large equity and can afford to lose a significant percentage (of the asking price),” he says, “you may have the chance for a lower price.”
Most are unlikely to sell for less than what they owe the bank, he notes.
So, too, if the home has been on the market for many months, the seller may be getting desperate and willing to accept a particularly low offer.
Is there a rule of thumb regarding how low to go with a first offer? Real estate experts differ.
Canal, whose territory includes Irondequoit and Greece, and who also is a licensed appraiser, considers a bid of 10 percent below the asking price the least one can reasonably offer without offending the seller by appearing to want to “steal” the house.
But Peters says he has no cardinal rule and, though he always gives a client his best assessment of a home’s value, will present any offer that his client wants him to.
Where a great disparity exists, however, between the listing price and the figure that his homework has brought him to, Peters suspects that “someone did a bad job” pricing the house. A careless agent may have accepted a listing based on the seller’s opinion of the home’s value rather than a thorough market analysis.
Nevertheless, some buyers do not hesitate to offer 30 percent or 40 percent below the asking price, and sellers have been known to grab such deals. Perhaps the seller needs to move quickly, has owned the house a long time and has enjoyed tremendous price appreciation, or simply has grown tired of the selling process and a paucity of offers.
While many buyers are preoccupied with how low to go, others may be competing with several other buyers to offer sellers the sweetest, most expedient deal possible.
Peters does not discourage buyers willing, after falling in love with a house, to promptly present an offer that matches or exceeds the asking price. Such clients fear that “someone will buy it out from underneath us”–and they may be right.
Donald Golini learned the hard way how important it can be to act fast on a well-located house that seems to be priced right.
After looking casually for a few months and seeing several houses they loved get snapped up, he and his wife, Tracey, finally got serious about a Fairport home that had precisely the old-world character, size and location they sought.
A few days after attending the property’s first open house, they decided to put in an offer, though they had spent only a few minutes in the house and were not completely comfortable about acting so quickly. The area was so hot, they reasoned, that they might not get another chance at it, and they planned to make their offer contingent on an engineer’s inspection.
But in the few days the Golinis deliberated on the home’s value, someone else snatched it up–for more than the asking price.
Shortly after, determined not to get burned again, the Golinis prepared to pounce on a Pittsford house that their Realtor told them of before the ink was dry on the listing. Again, they were beaten to the punch: The house sold in less than a day.
They finally bought a house in Brighton that had been on the market long enough to have its price reduced. While the Golinis’ experiences may be typical of certain neighborhoods or house types, other, inexplicable situations can light a fire under buyers.
Peters has known of houses that have sat on the market for months with no activity, and then, within 48 hours, suddenly had two prospective buyers fighting over them. “It doesn’t make sense,” he says, but it happens.
Which underlines yet another irony of the real estate business: Just because a house should sell for a certain price does not guarantee that, at any given time, a buyer is ready and willing to pay that.
Even for buyers who leap before they have done exhaustive research, the system generally prevents them from making a major mistake.
Any deal for which a bank mortgage is needed, for example, will be subject to an appraisal, Peters points out. Because the bank is putting up the bulk of the money, he says, it is concerned about the protection of its investment.
When an appraisal comes in lower than the home’s purchase price–as it does some 10 percent of the time, in Peters’ experience, possibly indicating that the buyer was uninformed or overzealous–the deal goes back to the negotiating table. The seller has the option of furnishing documents to try to prove the appraiser wrong, or renegotiating the purchase price.
A buyer paying with cash, Peters says, would be wise to hire a real estate-licensed or -designated appraiser before finalizing the deal.
Agents frequently also advise buyers to hire an engineer or inspector to assess the home’s structure and systems. More buyers now are requesting tests for radon in the basement, and, within a couple of years, Peters says, a law will require home sellers to remove buried storage tanks and have the soil tested for contamination.
Many Realtors these days are asking sellers to fill out and sign detailed disclosure statements, alerting potential buyers to major defects in the property.
In addition to weighing such standard information, some buyers may opt for further research–police records on the incidence of crime or mischief, perhaps, or how busy the street gets at rush hour.
While Peters and other brokers are extremely cautious about antidiscrimination laws that prevent them from discussing the neighbors, nothing would prevent a potential buyer from attempting to meet those people. Peters does advise buyers curious about the mix of neighbors to hang around when school lets out or when workers return home in the evening, and draw their own conclusions.
He also suggests that buyers take note of the exterior maintenance on nearby houses and the condition of cars in those driveways.
Still, no short-term investigation will turn up every negative, nor will any market valuation technique account for every variable: differences in size, age and setting; proximity to schools, parks and shopping; the like-mindedness of neighbors; a corner lot; a view; an extra bathroom; a larger garage. While one person will pay handsomely for a treed lot, another may see all those maples simply as a daunting chore.
After 27 years of selling real estate, Peters is philosophical about the vagaries of the market and people’s tastes. While a Realtor can provide a buyer with as many cold, hard facts as possible to legitimize a purchase offer, only the buyer can decide whether or not to take the leap.
“You can buy a house with brains,” Peters says, “but you own it with your heart.”

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