A Reader Asks A Common But Important Question

[an excerpt]

"My husband and I are in the market for our first home. We like our agent but she hasn’t been an agent for very long and she can’t give us a straight answer about how much below the list price we should offer. We don’t want to spend too much with the current real estate market. What do you think?"

Assuming you are in the greater metro Atlanta area, here’s what I recommend:

Only search and view homes that are within your price range. If you can afford a $200K house - don’t look at $225K houses in the hope that those sellers will come down.

When you find a home that meets your wants and needs, consider its relative value to other comparable homes that you have viewed. If this home compares favorably, then chances are it is priced properly. If it seems overpriced, it probably is.

Your agent should then do a market analysis of the recent sales of the closest comparable homes to get a feel for what kind of value an appraiser is going assess.

Then your agent should evaluate the current market for this home - taking the number of similar listings and absorption rate into consideration.

And finally, look for motivating factors. If the home is vacant, or if your agent can discover the seller’s motivation to sell… you can use that as the final tweak.

Some properties - recently listed at an agressive price - will sell for their asking prices… even in today’s market. There are seasoned agents out there that that price properties based upon the goals of their clients. Some clients want top dollar, while others want a quick sale.

So in closing, there is no magic percentage you can use to formulate a good offer. There are simply good methods at arriving at a wise offer.

While many people are heading for the exits, smart investors are pursuing good real estate opportunities. Why? Because, like the stock market, smart investors buy low - and sell high.

We are witnessing an interesting moment in recent real estate memory. A point where prices are under pressure; interest rates are low; inventory levels are high; and mortgage loans are difficult for many people to obtain. These factors are not static - they are dynamic - and these factors are subject to change.

Recently, I have been spending a great deal of time helping my buying clients analyze these opportunities - and while it is more time-intensive than representing sellers - it is very rewarding.

Some have been looking for their first home. Others have been looking for their next home, with the intent of holding their existing homes as rental property. Some want to acquire rental property at a discount. Others want to pick up a second  home.

I will be featuring a few of these clients and their quests in upcoming posts, as I find them all very interesting and entertaining - and hope you will as well.

One set, a young professional couple, bought their first home with a level of knowledge not usually found in first-time buyers. Their window of opportunity was a narrow one, and they had to make decisions quickly and accurately - and they did so with the finesse of seasoned pros.

Another is a college student who put an offer in on a foreclosure at the tender age of 19, and closed on it shortly after his 20th birthday. He has no car - but he now has his own home… and a nice chunk of instant equity to boot. Definitely a case where his parents bestowed some valuable knowledge of life on him.

I’ll even feature a set of clients from California who are purchasing a second home in Atlanta - completely without ever having stepped foot on the property. You read that correctly - they are making a purchase a week before coming to Atlanta to see what they bought!

In each of these instances, the buyers are enjoying a great value resulting from a slow real estate market. They are all looking at their properties through a long-term lens, and will be rewarded handsomely for jumping in while others are sitting on the sidelines.

That’s how the smart real estate investors do it.

Depending Upon Who You Ask - It Just Might Be

If you are well-qualified to buy property, it is a good time for you. Like most things in life, the pendulum swings both ways… and right now, getting a mortgage is much more difficult that only a few weeks ago. As a result, the market for buyers has strengthened. More inventory because fewer buyers can qualify.

At the same time, we are experiencing an increasing rate of foreclosures - and many of the banks are getting serious about reducing their REO (real estate owned) portfolios. In fact, we are starting to see more real estate auctions than ever - further evidence that the downward pressure is on.

For the buy-and-hold investor, this is good news. The selection of property is good, and more often than not - you have the time to truly analyze the economic viability of any particular property. You also get the added bonus of getting remediation performed at a more reasonable cost, as contractors are not as busy as they used to be.

You also get the benefit of more renters entering the market, as the purchase option has been taken off the table for them.

For the purchaser looking to occupy the property, you share most of the benefits that the investor now enjoys.

The only purchaser who is not benefiting from this market is the flipper. To purchase a property, renovate it, then hold it for a year while trying to get the profits seen on some TV show is a recipe for disaster.

But to purchase, renovate, rent it out - then look to sell in the future when the market shifts again in the favor of sellers IS an intelligent move.