How to win in a cooling real estate market

Posted on 18. Nov, 2010 by in General

By Mark Weisleder | Wed Nov 17 2010

We are probably entering into a period of stable house prices, a so-called balanced market where buyers and sellers are roughly equal in numbers. This is good news for buyers who face reduced pressure of price wars and also means sellers will have to work a little harder.

My hunch that this is happening, is based on recent statistics showing that while sales have decreased year over year, Canadian home prices remain stable. A big factor is probably rates that remain at historic lows.

First, some tips for buyers — key do’s to keep in mind:

Walk around the area

Talk to the neighbours. Ask whether homes have experienced sewage back-ups, and whether there are any termite problems. Travel to or from work see how long the commute would be. Ask if there are any unusual circumstances, such as a grow-op, in the area. The seller is unlikely to volunteer this kind of information.

Make the offer conditional

Even if you have been pre-qualified for a mortgage, you need to make sure that your lender is satisfied that your home is appraised for at least as much as you agreed to pay for it, to ensure that you obtain the financing that you require.

Another condition to seek, if you still have a home to sell, is that you can cancel the deal if you can’t sell your home within the next 30 to 60 days. Sellers will be more accommodating to this request in a balanced market. Otherwise, if you have trouble selling your home, you will have to carry mortgages on both homes for an extended period of time, which you may not be able to afford.

Get a home inspection

Make the purchase conditional on being satisfied with the results of a home inspection. It is critical that you hire a reputable company to do this inspection for you. Their findings can save you potentially thousands in after-closing repair bills by pointing out in advance what problems that may exist in your home. If you discover any defects, you may be able to use them to leverage a lower price.

Ask hard questions

Cut to the chase, see how the seller answers. Ask point-blank if they have had basement flooding problems, mould, roof leaks. Most sellers will now refuse to sign property disclosure statements, but they are required to respond truthfully to these questions if you ask them directly. If the sellers refuse to answer or act suspiciously, then you need to discuss this with your home inspector and your real estate salesperson and either adjust your purchase offer or walk away.

Turning the tables, here are key do’s for sellers:

Stage your home

Get advice as to which rooms, usually the kitchen, to make cosmetic changes that will make the most impact on potential buyers.

Consider having a pre-listing home inspection. This gives you a heads-up to be able to repair anything in advance a buyer might find anyway. Make the report available to any potential buyer. This will demonstrate integrity and distinguish your home from other sellers.

Set a fair price

Avoid testing the market with a price that is 5 to 10 per cent higher than what your home should sell for. Make sure you obtain a comparative market analysis from an agent and then be realistic when they recommend a listing price. Go for a walk and see what else is for sale in your area.

In a balanced market, a listing price that is 95 per cent of fair market value will usually generate the best offers in a shorter period of time. Ask any salesperson you interview to how long on average it takes for them to sell a home. The shorter the period, the better the proof that this salesperson knows how to price a home and obtain the best buyers sooner.

Be careful with your first serious offer. In a balanced market, the first serious offer that you receive is usually the best offer that you will see. Be careful about trying to negotiate for every last cent as you risk losing the entire deal.

By following these simple principles, both buyers and sellers will be better prepared during a balanced market.

Real estate lawyer Marc Weisleder is the author of Put the Pen Down! What homebuyers and sellers need to know before signing on the dotted line

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