Will You Be Ready When You're in a Buyer's Market?

These days, most homeowners trying to sell a home have the upper hand -- the seller's market means home prices are high, inventory is low, and sellers can afford to be choosy with the offers that are presented to them.

But what happens when that changes? Places such as Boston, paralyzed for weeks by a brutal winter, are already bucking the trend and moving toward a buyer's market, when potential home buyers hope to leverage their bargaining power.

When the number of homes on the market outnumbers the number of buyers, sellers may be more willing to negotiate on the price of their home and offer concessions to seal a deal. But potential buyers would be wrong to assume they'll be able to find bargain-basement prices.

Follow these five tips to make sure you don't make mistakes when trying to take advantage of a buyer's market.

1. Know the market

Gary Lucido, president of Lucid Realty in Chicago, says it's important to understand what the market you're looking at is offering.

"When everything is overpriced, you are underpricing everything," he says.

If you think everything is too expensive, it's time to move on to another neighborhood. Trying to make offers substantially below market value is usually a waste of time.

If you're looking for the best kind of deal, do your homework and look for a place that's been on the market for a long time.

"The longer a house or apartment is on the market the more favorable or open the seller will be to making a deal," says Rebecca Knaster of William Raveis in New York City.

2. Lowball the right way

It's common for buyers to pitch a lowball offer in a buyer's market -- in fact, it's a good strategy. But keep your expectations realistic. Lucido remembers an instance in which a buyer wanted to offer $500,000 less for a mansion in Oak Brook, IL, listed at $2 million.

"[He] got mad when I told him it would sell much higher than that," Lucido said. "He felt like the right Realtor could get the seller to accept a below-market offer. It sold within days for $1.9 million."

Check to see what houses have sold for in the area, and pay attention to the appraiser's assessment.

3. Know when to ask for upgrades and discounts

It's a buyer's market, so you'll have more leverage to ask for things you want. But do you ask the seller to make the repairs, or deduct those repairs from the asking price to shape your offer?

Lucido says to keep it simple.

"Take the property as is and discount all the issues you have," he said. "The seller just wants to walk away from the property and if you start complicating it, you may end paying more than you would if you just addressed those issues yourself."

"Plus, if the seller fixes it, you may not like the way they fix it," he added.

Keep in mind this strategy won't work for some loans, such as those offered by FHA, which can have stricter qualifying requirements than other loans. If that's the case, the repairs need to be made before the loan can be approved.

4. Show you're serious

When you're factoring the price of repairs into the cost of the home, don't talk in generalities.

"Be specific. This helps everyone understand you are serious and not just floating guesses," says Glenn Phillips, CEO of the multistate brokerage Lake Homes Realty.

Discuss with your Realtor or builder how much certain projects will cost to fix or update and use those numbers. If you can provide a quote, that's even better.

5. Talk closing costs

Closing costs typically amount to about 1% to 2% of the sale price. But when it's a buyer's market, you might be able to get those costs reduced. You might ask your lender to reduce costs that seem too expensive, and you might ask the seller to pay for certain home-selling fees. For example, if there's a flip tax for co-ops in New York City, you could ask the seller to pay for it, Knaster says.

Bottom line: Don't be afraid to negotiate. And don't be afraid to drop the deal.

"Be willing to really walk away," Phillips said. "Once you emotionally have to have that house, the seller has additional leverage."

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