Tag Archives: negotiating an offer

How Online Home Valuation Tools Work and Don’t Work

Whether buying or selling a home, online home valuation tools (also called Automated Valuation Models, or AVM’s) such as Zillow’s Zestimate can be useful. But they can also be problematic. Since most buyers and sellers are looking at these values, it is a good idea to understand them and how online home valuation tools work and don’t work.

RBHcomuterIt’s a computer, not a person. Online estimates follow an algorithm to give a projected estimate of value. This means that the algorithm is based on the accuracy of the data that is has to compute. The problem occurs when data is input by sellers that may falsely inflate values or where lack of data may not produce an accurate value.

What it (generally) measures. The value of your home will usually be a product of comparable homes. How does your home compare to similar homes that recently sold (within the last 6 months) and are actively listed within a 1-2 mile radius? In addition to proximity, other features compared are: square footage of the home, number of bedrooms and bathrooms, year the home was built, and size of lot. Values tend to be most accurate when this data comes from homes that are fairly new tract homes. Homes that are custom or have been updated with custom features, however, will likely be off on their value here.

It can also be problematic when the algorithm doesn’t recognize a neighborhood boundary. For example, is the computer is using comparable homes from a nearby condo complex when your home is a single family residence? Or, do some of the comps used fall in differently rated school districts? Also, computers are not likely to take into consideration the terms of those sales, such as distressed or discounted sales.

RBHaley Mortgage CalculatorOther features that are probably not figured into the algorithm are: views, location relative to busy roads, outdoor features such as a kitchen and/or a pool, whether the lot is flat or on a steep slope, and quality of the neighborhood, and higher end upgrades and appliances.

Know your competition. The reason comparable homes are considered when deciding value is based on the idea that a typical buyer will not pay more for a similar home if all things are equal. This is why it is especially important to look at recently sold homes (last 6 months) to help determine what people have paid. One mistake many sellers and buyers make is basing value on homes that are currently listed. The problem with this logic is that often the list price is the “best case scenario” for the seller but not necessarily what a buyer is willing to pay.

The bottom line. Being able to differentiate the value the of your home based on specific features is an important part of putting these online home value tools into context. So, unless you want to hire an appraiser, use online home value estimates only as a supplementary tool. Work with a trusted real estate agent to get a more accurate home value (they have additional tools and knowledge to help obtain this value). And remember, what a seller paid for specific upgrades will not always equate to what a buyer will pay.

R.B. Haley Fine Homes & Estates

12396 World Trade Dr., Ste. 306, San Diego, CA 92128

(858) 592-4895       http://rbhaley.com/     CalBRE#01843189

Energy Efficient Home Improvements That Also Add Value

A home for sale that is energy efficient is almost always more appealing to buyers. Why? Because buyers know that they will save money monthly because of the efficiency of the home and will not have to make those upgrades themselves. But not all upgrades are valued the same, and not all buyers are willing to pay a higher price for upgrades they do not value. Here are some common energy efficient home improvements that also add value to your home (so everyone wins!).

Windows     If you have not already upgraded to energy efficient windows, start here. Not only can older windows be an eyesore, window replacements are one of the few upgrades that instantly give an updated look while also providing great function by helping to regulate the home’s temperature and reducing its exposure to extreme heat and cold.RBH window

Appliances     Many home buyers today expect kitchens to be updated with modern amenities like granite or quartz countertops and stainless steel. This also includes energy efficient appliances. Again, this upgrade is functional and goes a long way with making a positive visual impact.

Furnace and A/C     If your home’s furnace or air conditioner is nearing the end of its functional life, it may be worth replacing it before you have to. Home buyers become weary when they know that an expensive item has a higher potential for needing to be replaced in the near future. Even simply adding a programmable thermostat can go a long way.RBH air conditioning

Insulation     While insulation is not something potential buyers will necessarily be able to see, it is likely something they will be able to feel. A well insulated home will offer more in the way of comfort from extreme temperatures and noise. And, as far as energy efficient home improvements, insulation is relatively inexpensive to install.

If you want to prioritize your projects further but are not sure where your house ranks in terms of energy efficiency, you can start by requesting an energy audit from your local utility company. Another benefit that homeowners may overlook is the added bonus of homeowner tax credits available by the IRS as an incentive to upgrade your home’s energy efficiency.

While not all buyers are willing to pay more for energy efficient upgrades (even in a seller’s market), many times the homes that are in need of updating and upgrading are magnets for real estate investors who see it as an opportunity to invest their own money into these upgrades, which results in a lower offer price to the seller. Consult with your real estate agent for further guidance.

R.B. Haley Fine Homes & Estates

12396 World Trade Dr., Ste. 306, San Diego, CA 92128

(858) 592-4895       http://rbhaley.com/           CalBRE#01843189

Tips for Buying in a Seller’s Market

If you are a home buyer in today’s real estate market, you may be experiencing some challenges. Low inventory and faster selling times (average of 21.8 days Days on Market) make this seller’s market tough to navigate for potential buyers. So what can buyers do to stay competitive? Here are 8 tips for buying in a seller’s market.RBHaley Mortgage Calculator

Get Pre-approved before you start looking     Getting pre-approved before you start looking will give you the price range you know you can comfortably afford, and looking below that will give you some room for negotiating up if needed. Also, getting pre-approved shows sellers your credit worthiness and sets the stage for a smoother and more successful purchase.

Know what you need vs. what you want     Knowing your must-have features (and being in agreement on those if you are buying with a significant other) helps you know where you are willing to compromise and where you are not. Knowing what is negotiable in your mind will speed up the decision making process while ensuring that your priorities stay in check.

Find a rock star agent     Anyone can search for homes online, but a rock star real estate agent is well connected to other realtors and the market, and may even learn about homes that are not yet listed. She or he should give you a competitive edge by using her or his resources to not only find you right home, but help sell you to the listing agent and sellers as the ideal buyers. If you aren’t getting that kind of service, it might be time to look for a new agent (and we happen to know a few amazing agents!).

Be ready to act. Fast.     Being ready to act fast goes beyond being pre-approved. You will want to have a pre-approval letter written by your lender as well as proof of funds (such as a bank statement) to show you are willing and able to make a Good Faith deposit upon acceptance of your offer. It also helps to have letters of recommendation from employers, landlords, and anyone else who can vouch for your good character and dependability. Have these things ready to go so that an offer can be executed on a moment’s notice, as even mere hours can make the difference in a seller’s market.RBHaleySignContract

Make your best offer     Many sellers are receiving multiple offers right up front. If your offer isn’t competitive from the get go you may not get the chance to counter offer. Remember, it’s not always about price. You can enhance your offer by reducing or eliminating contingencies or showing flexibility to work with the seller’s time frame. Understand what the seller is looking for and write your offer accordingly.

Make it personal     Don’t be afraid to tell your story as a buyer to appeal to the seller. Most sellers (unless it is an investor) cherish their home and want to know that whomever will be buying it will love it as much as they have. Get creative and you will be light years ahead of your competition.

Be realistic     As a buyer in a seller’s market, you are probably not going to get a killer deal. Be realistic in your offer based on current values but resist the temptation to bid beyond what you can comfortably afford.   Stay focused on what gives that home real value and do your research on comparable properties so you know whether the purchase is a good investment and why.

Keep moving forward     If your offer was rejected or you were outbid, don’t despair! Do your best to move on. Believe it or not, there are many “right” homes out there; it’s just a matter of finding the right one at the right time. Stay optimistic and keep looking…often times buyers end up finding something better!

R.B. Haley Fine Homes & Estates

12396 World Trade Dr., Ste. 306, San Diego, CA 92128

(858) 592-4895       www.RBHaley.com         CalBRE#01843189

 

What to Expect When Buying a Home: Making a Purchase Offer

So, you found the perfect home…now what? Assuming you have already take steps to get pre-qualified (if not pre-approved) for a home loan at this point (if applicable), and you already found a real estate agent you trust and want to work with, the next action step is to submit an offer to purchase the home. If you’re not sure what that looks like, keep reading on “What to Expect When Buying a Home: Making a Purchase Offer.”

Contact the Listing Agent. The first thing your buyer’s agent will want to do is confirm with the listing agent that the sellers are still accepting offers. Even if a home sale is Pending, the listing agent may accept back up offers in the event that the current accepted offer falls out of escrow. A good agent will also be able to glean some additional information and get a general feel for what the sellers might be looking for. Keep in mind that the sellers may also have criteria for selling, such as a time frame for closing escrow or moving.RBHaleyDollarSign

Consider an Offer Price. Start by taking a look at your own price range (the amount for which you have been pre-qualified) and what you feel comfortable paying. It can be easy to get excited and emotional about a home you want, but try to keep a long-term perspective throughout the process. Your agent should share with you comparable nearby homes that are for sale or have recently sold to help guide you to a purchase amount that seems appropriate. Be sure you are comparing like features (for instance, if one home has a remodeled kitchen and one doesn’t, then that should be taken into consideration).  Also, leave yourself some room for negotiation and closing costs (not to mention moving expenses).

Other Negotiable Terms. There are other terms and expenses included in the sales transaction that can be factored into the purchase offer. These can include paying/not paying for reports and/or suggested repairs, removing or including contingencies for the sale, and accommodating the seller’s timing needs for escrow or moving, among others. Generally speaking, the easier the buyer makes the purchase on the seller, the more likely their offer will be accepted. This can also mean that the buyer may be shouldering more risk, so it is important to walk through all of these things with your agent.RBHaleySignContract

Submitting and Offer and Counteroffer. Once you settle on a purchase offer price and ideal terms of sale, your real estate agent will help you complete the purchase offer contract (or Residential Purchase Agreement). This will be sent to the listing agent to present to the sellers. Often times (and especially in a “seller’s market”), the sellers will counteroffer with a higher price and/or additional terms. Your real estate agent will help guide you through this negotiation process (which might include several counteroffers) while promoting and protecting your best interests.

If all goes well, your offer will be accepted and the process of escrow will begin. For more information on the next stage of the home buying transaction, stay tuned for “What to Expect When Buying a Home: In Escrow.”

Investing in YOUR Future,

R.B. Haley Fine Homes and Estates

Did we miss anything? Feel free add comments below with some of your great ideas and/or feedback. Thanks for your input and please remember to share!

R.B. Haley, Inc. 12396 World Trade Drive, Suite 306, San Diego, CA 92128

http://www.RBHaley.com   858.592.4895   CA Lic#01843189/01219416

What to Expect When Selling a Home: Negotiating an Offer

Selling a home is a process, and knowing what to expect at each stage will help that process go more smoothly. By now you have likely found the best real estate agent to represent you, taken steps to get your house ready to be listed to sell, and may have staged your home. So far, so good. Now that your house is looking its best and your agent has likely listed it on the MLS, you can expect to have multiple appointments from real estate agents to show your home to prospective buyers (and possibly one or more Open Houses). Ideally, this will result in receiving an offer from a prospective buyer (or buyers). This brings us to the next stage: Negotiating an Offer.

RBHaleyChessAs you and your real estate agent consider how to negotiate an offer, it is a good idea to revisit some of the questions we posed in an earlier article: Why do you want (or need) to sell your house? What is your time frame for selling? What price range do you need (and want)? Are you prepared to move?

The answers to these questions will help you define what you need and what you want (and where you have room to compromise). Here are some additional negotiating points to consider:

  • Take the emotion out of the negotiation: Realtor.com suggests trying to view your home as a business prospect. Putting aside the emotional attachment it represents to you will help you to negotiate more clearly and effectively.
  • Be informed: When negotiating, have recent comparable sales on hand to support your asking price. Also, be aware of the current lending and market conditions- Is it a seller’s market or a buyer’s market? Are interest rates going up or down? Is housing inventory in your neighborhood low or high?
  • Expect to negotiate: Be prepared to counteroffer. Buyers anticipate that sellers will counteroffer, so again, knowing where you are willing to compromise (and not compromise) will help you focus your negotiating strategy.  RBHaleySignContract
  • What’s negotiable?: In addition to the sales price, many terms of the sale are negotiable. For instance, deciding on who (the buyer or seller) pays certain closing costs may be negotiable. Timing the close of escrow may be another negotiable item. Including/excluding expensive, non-permanent fixtures can be part of the negotiation as well. The strategies are many; consult with your real estate agent to decide what’s best for you and your situation. (And, yes, the real estate broker’s commission fees are also negotiable.)
  • Get it in writing: Any promised or proposed changes to an offer create a counteroffer (which requires a new or amended contract). Be sure to always put everything in writing.

Of course, sellers are not obligated to negotiate offers; offers may be rejected outright or accepted on the terms offered. Whatever the decision, your real estate agent can help guide you through it.  For legal advice, however, it is always advisable to consult an attorney.

Once the final sales terms are agreed upon and the contract is signed, the transaction enters escrow. We will talk more about the “What to Expect When Selling Your Home: In Escrow” in our next article.

Investing in YOUR Future,

R.B. Haley Fine Homes and Estates

Did we miss anything? Feel free add comments below with some of your great ideas and/or feedback. Thanks for your input and please remember to share!

R.B. Haley, Inc. 12396 World Trade Drive, Suite 306, San Diego, CA 92128

http://www.RBHaley.com   858.592.4895   CA Lic#01843189/01219416