Buying a home? Know your seller
You're shopping for a home, and you've checked out the neighborhood, the schools and had the house inspected. You might be ready to make an offer.
But what do you know about the sellers?
Understanding the sellers' situation, and why they've put their house or condominium on the market, strengthens your negotiating position and makes it easier to close the deal on your terms.
Anything that makes the seller just want to get out of Dodge -- a job transfer, divorce, death or move to assisted living -- gives you an advantage.
Foreclosures and short sales are signs of financial distress and another factor working in your favor.
To find out what kind of a deal the seller may be open to, start by asking the obvious, says Alex Goldstein, an agent at Realty One Group in Scottsdale, Ariz.
The most obvious, and most helpful, question is, "Why are they moving?"
"It's amazing how much info you can get just asking that question," says Goldstein.
The No.1 one thing you want to determine is whether they have any sort of time pressure or deadline hanging over their heads.
When you discover they're moving to California and they've already put an earnest money down on a house, figure there's more flexibility in the price.
"We can get more sophisticated, but that's the bread and butter," says Goldstein. “I think people underutilize the obvious like Googling the seller. Is there something that's changing the seller's life?"
One of the most common things you’ll discover is that the couple that owns a home is going through a divorce.
"A divorce doesn't necessitate a speedy sale, but it can motivate a speedy sale,” Goldstein says. “That's something to know."
Don't just ask questions of one party. Ask the co-listing agent, and the owners themselves if they're home for a showing. You'll get different answers.
Just watch your questioning style. If you make an inquisition of it, they'll clam up. Just ask basic, friendly questions and let them talk. Don't interrupt.
How flexible the sellers might be on price isn’t the only thing you're trying to discover. Anything you can do to make your offer more attractive helps your cause.
For example, some sellers want a fast sale, but others would like more time to move.
Tien and David Lau knew there was intense competition for the home they wanted in San Mateo, Calif.
The real estate agents they were working with found the sellers' weak point -- their kids loved their school and wanted to finish out the school year.
The Laus then wrote the sellers a personal letter appealing to them as another family with kids looking for a home (they were expecting their second child).
"We ended up working in a very family-friendly free rent back package that would allow just that,” says Tien Lau. “None of the other bidders were in a position to do this.”
The resourcefulness of the Laus' and their agents helped them beat out five other offers for the home -- and they weren't the high bidder.
Or perhaps you learn that the sellers are downsizing or moving to Hawaii and don't want to deal with moving or selling many of their furnishings.
You might offer to buy some of their furniture as part of the deal or agree to dispose of whatever they leave behind, relieving them of that burden.
"If you're talking to a seller and they say, 'I have all this junk and I have to have a garage sale,' say, 'Don't even worry about it, I'll take care of it.' That's music to their ears," says Goldstein.
The home's history of prior offers and the time it's been on the market is also interesting. Perhaps three offers have been accepted and then fallen through -- that seller is exasperated.
"That allows you to position your offer with credibility and seriousness as more important than the price," Goldstein says.
Even if the other offers were higher, they weren't real, it was fantasyland. Convince the seller you are making a real offer and are ready to buy.
You might think a larger earnest money would convince a seller you're serious. It's not that big a draw, however, because it’s so easy for buyers to back out of a deal and demand their earnest money be returned based on something they don’t like in the home inspection.
Some buyers demonstrate how dead serious they are by offering nonrefundable earnest money.
Just last week, Goldstein's buyer offered full price on a house, only to be outbid by a buyer with cash and a nonrefundable earnest money deposit.
"That's total desperation," he says. "It's something I would not do except in an extreme case, but it is a tool to show a seller how serious you are."
On the flip side, be careful how well you let the seller, his agent and even your own agent know you. Whispering to your spouse, "I want this house, no matter what!" dramatically weakens your position.
At the end of the day, the person who can't walk away from the table ends up with the short end of the stick. If you don't mind the possibility of walking, you may get yourself a very good deal, indeed.