How To Get A “Deal” In Real Estate
by Crissie Cudd
The first step in finding a “deal” is to define what a “deal” is. Is a “deal” getting the biggest price reduction off the list price? Is a “deal” the property that will appreciate the most over the next five or ten years?
Very often the best way to decide if a property is a deal is to look at supply and demand. If the supply exceeds the demand, as it does in most of today’s market, then there is a better chance of getting a price reduction off the list price. However, if the demand is not there, will the property appreciate over the next few years at an acceptable rate?
If the demand is high, then it’s unlikely that a seller will reduce the price very much, if at all. Yet if that demand continues in the future then the value of the property will generally appreciate at or above market rates, making today’s full price a “deal” in the future.
So how can you determine “supply” on a property? One way is to look at its “duplicatability”. If this home or neighborhood can be duplicated right down the road at the same price or close to it, then the supply may always be adequate to meet the demand. If the home or neighborhood is located in a unique area or has features that cannot be duplicated, then the supply is limited.
To determine “demand” look at features that will always hold appeal, such as location.
For example, navigable water is generally a sound buy – they aren’t making any more. But not all navigable water is created equal. Historic data on sales in one area can be compared to another to see what demand has been like over time. Other neighborhoods that have locations on or near the beach, or downtown, or historic properties also can not be recreated.
Within a neighborhood, properties also have locations that make them unique. A water, preserve, or golf course view may make them special.
The next step is to look at the past sales. Look both at the recent and the long term sales history. Look at the list vs. the sales prices, the number of days on the market, and the price increases over time. Look at the overall number of sales in an area or among comparable homes. Uniqueness does not in and of itself mean there is a high demand. Again, the only home with that feature may mean there was no demand to build more and demand will probably be low in the future.
Remember the old rule of the three most important things in real estate: location, location, location. Great locations hold their value in “down” markets.
Of course practical considerations have to play a part. Even if you have champagne taste and a beer budget you can still find the best property within your price range that fits your criteria.
Do not forget to do your homework. Check with the county to find out what is going on in the area over the next few years. Additional developments, road expansions and extensions are all a part of the public record. All those factors will affect future supply and demand so don’t overlook them. Do not rely on a seller or realtor to supply you with information that they may assume you already have.
The next thing to do when the property has been identified you want is to write a “clean” contract. That means a contract without a lot of contingencies and concessions. Writing a good contract is a balancing act between price and terms. Sellers look at the contract and must see something that is of benefit to each side. So a contract that makes a lot of demands on the seller and asks for a really low price runs the risk of rejection without a counter.
Having the financing worked out in advance so that the seller has confidence in the buyer’s ability to close is a major term that a buyer can address prior to writing the contract. Understanding the clauses in the contract that pertain to inspections and such can prevent extraneous clauses from being added that only complicate the contract negotiations.
Finally, remember this. Unless you are an investor, you are buying a “home”. Certainly you want to know that the home is worth what you are paying and that it will hold its value. But it is a home – the play you and your family and friends will enjoy for years. Sometimes, the best “deal” is to pay retail for the best property you can afford and then sit back while it appreciates in value. In a few years your friends may call you a genius for that “deal” you got!
