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Saving Money on your next Home Purchase
Here's how you can save $1,000s on your next real estate home purchase. There are two ways to accomplish this. Motivated Seller and Smart Financing.
The first method involves getting the lowest price for the home, and finding your motivated seller. It's very simple!
There are two types of real estate home sellers. The sellers that use real estate agents and the sellers that sell on their own home, also known as FSBO or For Sale By Owner. These are home sellers that post signs, flyers, and put ads in the newspaper to sell their homes. It really does not matter which one you use. Agents can't sell more than market value. And For Sale By Owners will want the most they can get. I have never met a seller that will sell for less than a home sold by an agent. However, you can find great deals after a home has been listed with several agents and is still on the market.
It doesn't take a real estate genius to realize that sellers become motivated after they realized that perhaps they can't sell. This usually happens 30 to 60-days after the home is listed on the market. In the beginning, sellers assume they have the most beautiful home on the market. And most believe they can get top dollar for their real estate. This is far from the truth. The truth is, many buyers cannot qualify financially for the home they desire. Homes go from one agent to the next and stay on the market for many reasons.
Let's take the FSBO sellers. They are constantly harassed with calls from real estate agents wanting to help them sell their homes. The standard commission is 6%. On a $300,000 property, the seller will pay the agent $18,000 to get the property sold. Typically, a FSBO that has his property on the market for a 30-90 days, and cannot sell, is READY, WILLING and MOTIVATED to discount the price of home.
The $18,000 does not guarantee that the home will ever get sold. At any given time, there are homes listed by agents that have been on the market for months and even years. However there can be good reasons for this, price to high, bad locations, bad floor plan, home in need of too many repairs.
Here's what you can do. Approach FSBO sellers right before they contract with real estate agents ( 30-90 days after they realize they can't do it ). Based on a $300,000 property, it makes sense to offer the seller at most $282,000 ( $300,000 - $18,000). Tell the seller that if he uses an agent, there is no guarantee that the home will ever sell. Agents do not buy homes. They can only show homes if there are interested buyers. You are a buyer.
The main advantage for any seller to use a real estate agent is the MLS network - known as the multiple listing service. Think of the MLS as a computer network, which is only available to real estate agents. An MLS Home Listing allows real-estate agents to list and search homes on the system for prospective buyers. Since there are thousands of agents in a given Realtor® MLS area, the probability of getting more buyers is higher if the home is listed in the-MLS. An agent that represents a buyer will go there to find homes for his client. While a seller agent will list his client's property there.
If you search hard enough, you may even find VACANT properties. These are your best bet as the seller is no longer in the home. Be sure to ask agents to search for vacant properties, foreclosed homes, need work, etc. in the MLS. They'll be more than happy to accommodate you, since they will earn a large commission, if you purchase a home using their service.
Now that you have a better understanding of this, let's move on to the next step. Homes on the MLS can stay there for months without a buyer. The good news is you can call any agent in your area and ask them to do a search on the MLS for properties that have been on the market for 30 days, 60, 90, 120 days, even longer. The more time a property is on the market, the more motivated the seller can become.
Don't be misled by ads that read, " MOTIVATED SELLER," "MUST SELL," or "PRICE REDUCED." Although these are signs that you have found a potential motivated seller, real estate investors use this tactic to attract buyers. Always ask the seller what the property is appraised for or can appraise for, and base your decision on that value. You will be at a disadvantage if you buy from a seller that promises to take $10,000 off his price of $300,000, when the property is only worth $270,000.
If you're really hungry for great deals, pay attention to this next strategy. Know this and use what you know to your advantage. Real estate agents must sign a representation contract with the seller to list the property and to sell the home. Contracts are typically for 3 to 6-months. We know that agents are in the business to make money. They are most motivated to sell when near the end of the contract. This is the time when agents will advise the sellers to drop the price and to be flexible. This is the time to make your irresistible offer. Take it for what it's worth!
You may also want to have a friend or family member work with you to negotiate price with the seller and/or agent. If the seller does not accept your first offer, your friend could make a ridiculously low offer. Make sure that you allow enough time between the offers. The seller will most definitely feel insulted, but over time your original offer will begin to look attractive. Which is what you wanted in the first place.
How about financing? It's always best to get pre-approved for a mortgage before you do anything else. You might have time to waste and think you can buy the most expensive home in the area, but the bank may not think so.
Did you know that on a typical $300,000 home, you will pay about $6,000 in closing costs? That $6,000 will take you over 10- years to pay off. Most people are too busy paying off their closing costs that by the time they realize the truth, it's time to move and start over.