Holman & Holman Team

"Where Information meets with Buyers & Sellers"

"A Man Is Considered Wise, When Prepared With Information"

Nathan Holman

REALTOR®

Tel: 623 326 3162

It's a Buyer's Market Out There!

That is certainly the case for ARIZONA, as one of the hardest hit housing markets in the country. When there are lots of homes for sale and it takes a long time to sell them -- that's a "buyer's market."  In most of AZ, that's the current situation.

If it is a buyer's market where you live and you're looking to buy a home, that puts you in a strong position to negotiate for lower prices and incentives.

What kind of financial incentives can you ask for?

First, let's talk about how much you can ask for.  If you are putting ten percent down or more, you can ask for up to six percent of the price of the home.  If you are putting less than ten percent down, you can ask for three percent of the price.

Those guidelines do vary from loan program to loan program, so make sure you get pre-qualified first so you can ask your loan officer about the allowable incentives for your loan program and down payment.

Nothing guarantees you will get everything you ask for, but sellers are certainly willing to negotiate and give you something.

The next thing you should do is make your offer and ask for those funds to be applied toward your non-recurring closing costs.  By applying the incentives toward your closing costs you lower the amount of out-of-pocket cash you need to close the deal.  Otherwise, you would have to come up with a down payment and closing costs.

There are two types of closing costs:  non-recurring costs and recurring costs.  Non-recurring costs are things like points and fees that you only pay once and never pay again.  Recurring costs are things like insurance and property taxes that you continue paying over the time you own the home.  Most loan programs only allow you to apply incentives to pay non-recurring costs.  FHA and VA loans are exceptions.

Now comes the hard part.  Make sure no one takes advantage of you.  Sometimes a lender may just inflate your loan costs to use >>>

Opportunity Is Not Without it's Risks   

With the plentiful supply of homes, you are not without RISK. Risk from paying more than you should due to reducing home values. Risk of moving into a declining neighborhood or subdivision that may be reducing in value at a rate greater than alternatives. 

You need the experience of a REALTOR® to guide you and look after your interests and help you navigate all the risks of buying a home, that only professionally trained REALTORS® can do. >>>

up what you negotiated.  You want to work closely with your real estate agent and your loan officer to make sure you use all of those funds for your benefit. 

If you can get a 5.75% fixed-rate loan for a one point loan origination fee, you can probably get 5.625% for one and a half points and 5.5% for two points.  If you don't think your lender is getting you the best deal, talk to him (or her) directly and ask what would a loan officer from another company would get you for the same costs.  If you don't want to play hardball like that, get your agent to play hardball.  The agent wants you to close on the real estate deal because if you don't, they don't get paid.  Ask for help.

What you don't want to do when you make an offer in any kind of market is ask for a "carpet allowance."  Almost no lenders allow carpet allowances because that is just cash in your pocket and there is no guarantee the money will actually be spent on a new carpet.  If the carpet really needs to be replaced, just ask the seller to replace the carpet before you close.  That's allowable and it still saves you money replacing it yourself after you move in.

Even though it is a buyer's market what you don't want to do is load up your offer with lots of contingencies.  For example, if you have to sell your home to buy this one and you make your offer contingent on that sale going through, that is a contingency.

Loading up your offer with contingencies makes it less certain you will actually close, so that makes it less likely the seller will offer you lots of financial incentives.  The one contingency you always want to include, especially in this market, is that your offer is contingent upon the property appraising at the purchase price by the lender's appraiser.

We would like to ensure that you do not make a mistake and the you buy will all the latest market information to hand. 

Home selling is equally the same risk as you need to make sure that you are keeping up to date with the market so that you sell at the right price. Many home sellers have listed their homes and devalued their homes to the extent that their home is undervalue.  Do not be one of those people. You can avoid all these Risks by working with an Agent who will Inform and Protect you and work in your best Interests.