Krebs Financial Blog

This article will teach you five critical tips that will help you house hunt during a real estate market slump.

Do Your Homework

Make sure you know whether a price is really a good price or not. Check with real estate agents, compare listings for other homes in the same neighborhood, and so on. Don't forget that the newspaper, internet, and home buyer magazines are all great sources of information during this step.

Once you know the price range in the neighborhood where you're shopping for a home, you'll know whether or not the home you want is high or low compared to that price range. That information is very helpful to you in deciding how quickly to act on a price.

Prepare to Buy

Keep in mind that there are professionals out there ready to move on the best deals at a moment's notice. In order to compete for these best home-buying deals, you should get started with a mortgage pre-approval. Consider putting an attorney on retainer as well, so you can push the closing process through quickly.

You may also want an inspector and a home insurance agent at the ready. Having these professionals ready to assess the home and determine insurance costs will please the seller, lending weight to your offer.

Identify Emergency Sellers

Sometimes, a homeowner will be looking for the quickest possible sale. When dealing with such a homeowner, if you are truly ready to buy, then you have even more of an advantage. Asking for fixtures and other assets to be included, asking the buyer to pick up some of the closing costs, and negotiating the price of the home are all fair game with such a seller.

You can spot a highly motivated seller by these signs:

• The home has been on the market for many months, with price reductions along the way.

• The home is already empty or the seller doesn't live at the address that's for sale.

If you're in contact with a real estate agent, that agent can research the history of the listing to find out how long it's been on the market and what price changes have been made by the seller. This will help you determine just how much of an advantage you have when dealing with that homeowner.

You can also research deed records and sale records in order to learn what the homeowner paid for that home themselves. This helps you determine how much of the asking price is pure profit for the seller.

Negotiate

If homes aren't selling quickly, then real estate agents and home sellers are hurting. This means the agent will often be open to reducing their commission for the sake of a sale.

If you get an agent to lower their commission, then the seller should be willing to pass that savings on to you by lowering the listing price on the home.

Here are a few tips on negotiating with a real estate agent, from the Consumerist.com website:

• If you are selling one home and buying another, you can often get discounts by buying and selling through the same agent.

• Smaller real estate agencies may be more willing to reduce commission rates, because they have less business overhead.

• If you're dealing with an agent who won't negotiate, move on to another agent.

• Find a website that gives you access to Multiple Listing Service databases, so you can do your own research.

Make Sure Your Title is Clear

Part of the homeowner's motivation for selling their home, may be that they can't pay off other debts, aside from the mortgage, related to the home. Contractors, banks, and other parties may have a lien on the home - and that's something you need to know.

A title insurance company or a lawyer can research the question of liens and other debts and liabilities related to the house's title. Your mortgage lender will probably require you to do this anyway - but if you're buying in cash, you should plan on this expense during the house hunting process, in order to avoid a nasty surprise.

One Last Tip: Don't Engage in Bidding Wars

During an economic slump, you want to take action and get the best deal - not get stuck in a bidding war. If you're in a bidding war, that means you're too busy helping another potential buyer raise the seller's profits - and meanwhile, the smart buyers are grabbing up all the really good deals. Giving in to your "love" of a potential home, or your ego at being outbid, is a costly mistake. Set a bidding limit as soon as the bidding war begins, and once bidding reaches that limit, move on to the next listing.

Conclusion

As a buyer during a sluggish real estate market, you do have an advantage - but you must know how to seize that advantage. Make sure you get the best deal by organizing and making the smart choices. House hunting during a recession is a great opportunity to profit, find your dream home, and learn the ropes of real estate. Contact the right professionals to help you make the smart decisions and avoid common home buying pitfalls.