A good time to buy: Tips for smart buyers
A good time to buy : tips for smart buyers
Depending on your outlook and your current financial situation, these are either challenging times in the property market, or the start of a period of great opportunity says Johan Strydom, Managing Executive of propertygenie.co.za
"It's no secret that the housing boom of the past couple of years has slowed substantially," says Strydom. "Rising interest rates, stricter lending policies and declining consumer confidence have all put a dampener on house prices and sales."
"While the consensus view amongst economists, estate agents, bond providers and bond originators is that the market downturn is temporary, it is nevertheless expected to continue until at least late 2009 / early part of 2010.
So while in the short term the situation seems tough for sellers, it's anything but for the home buyers who have some time and funding available. In a market like this, patient, astute buyers can negotiate some pretty decent deals.
"The secret is for buyers to take a little time to do their homework," says Strydom.
Below are some key ways for buyers to leverage their negotiating power:
Understand your own finances:
Before a buyer starts looking around for houses, they should have as precise an idea as possible of what financing they have available for the transaction. A recent propertygenie.co.za survey revealed that the majority of homebuyers only do rough estimates of what they think they have available before starting the home-search process.
"While this may have been sufficient a few years ago, the introduction of the National Credit Act in mid 2007, and stricter lending policies from financial institutions, it is now vital to know exactly what you can afford", states Strydom.
An experienced bond originator like ooba (formerly MortgageSA) can assist buyers with a comprehensive pre-qualification to accurately assess their buying power. An additional upside of doing this work up-front is that once a buyer does find the right home, a lot of the financial paperwork is already underway.
Understand the Seller's Situation:
Having an insight into the seller's motivation for selling can be invaluable when negotiating on the final price.
"If the owners are under pressure or in a hurry to move, it is more likely that they will accept a lower offer," comments Strydom. "It could also be useful to understand what, if any the outstanding mortgage is on the property as there are costs to the seller in servicing the debt the longer the property remains unsold."
Don't be afraid to ask questions both of the seller and the estate agents.
Find out how long a property has been on the market:
The longer a property has been on the market, the more likely that it is overpriced for current market conditions.
Over-pricing a property is possibly one of the worst things a seller can do, but conversely it also presents one of the greatest opportunities for astute buyers who can expect price cuts up to 15% from buyers who are becoming desperate.
Research Comparable Homes:
The value of a property at a given time is governed by the current market, in that area. The real estate market is typically localized so it is important to have a good understanding of what similar homes in terms of size, space and location are selling for at a particular time.
"One of the easiest ways to do this comparative research is to use a property portal like propertygenie.co.za which showcases houses for sale by neighborhood from all the leading estate agencies," advises Strydom. "A large inventory of homes for sale in an area, especially in a buyers' market, typically gives the buyer the leverage to negotiate aggressively on price".
Price is not the only negotiable:
Often if a seller won't budge on the selling price, they could still be negotiable on other issues.
"Sellers can often be focused on the final offer, and the more attractive the price, the more flexible they could be on other points," says Strydom. "Buyers should also consider asking for concessions on transaction costs or items of repair or improvements."
New developments may require a slightly different approach:
In the case of newly built homes or new developments, developers are often less willing to lower selling prices, especially where they are selling identical units in the same development.
"In these instances though, developers may well be amenable to provide other incentives such as upgrades or free landscaping to sweeten a sale" says Strydom.
So while buyers may not be able to negotiate that strongly on asking price, there are still significant gains to be on these types of transactions.