Buyers Negotiation Power Stronger in 2007 in the Phoenix Real Estate Market
Unless you have been living in A cave over the past 18 months, you know the housing market has cooled off across the nation. Phoenix is not an exception. And even though our market remains strong as evidenced by our employment growth and census growth, the Phoenix real estate is also experiencing slower appreciation rates, longer days-on-market and other signs of cooling.
But this is good news! In fact, I think the abnormal market we had over 2004 and 2005 could not be sustained and, had it kept going, it would have hurt our economy more than it would have helped. So, thank God, today we are experiencing a much needed correction. And while we endure this correction, buyers have a distinct advantage to negotiate the purchase of their next- or first- home, whether it is a re-sale or a new-build.
Basic principles of economics tell us that when there is more supply than demand, prices go down, or, in this case, sellers are more willing to negotiate terms benefiting the buyers. This is what is referred to as a Buyer's Market.
In a Buyer's Market, sellers are competing for the few buyers interested in their product (the home). In this case, it doesn't matter whether the seller is the owner or a builder, they all must come to terms with the fact that there are more homes out there for sale than there are buyers and those willing to accept the buyers terms are the ones who are going to succeed.
As a Buyer in today's Phoenix real estate market, you have a stronger negotiation power. Let's take a look at a few things you can negotiate.
Closing Costs
If you are a buyer who is planning to use financing to facilitate the purchase of your next home, your closing costs could be somewhere between 2% and 3% of the total purchase price of the home. The median price for the Greater Phoenix area was $260,000 in February. This means that your closing costs for a typical single-family home could be between $6,000 and $8,000. This does not include your downpayment. As a buyer you can ask the sellers to contribute to your closing costs to minimize your out-of-pocket investment. This allows you to get into the home with less upfront expenses. During 2004 and the most part of 2005, when the demand far exceeded the supply of homes, sellers would never have considered this, since they were getting multiple offers in their home just days (sometimes hours!) after putting it on the market. Now, however, we have come full circle and sellers are more willing to offer concessions, knowing there are far more homes in the market than there are buyers. Now, you may find some stubborn sellers unwilling to negotiate with you. My recommendation: walk away and find someone who will.
Home Warranties
Whether you are getting into a new home or an older one, there are several things that can brake or malfunction resulting in costly repairs. As a buyer nowadays, you can request the sellers to pay for a home warranty that will cover most appliances and the HVAC system (a/c and heating) for the First Year you are in the home. The way these warranties work is that once it is in place, if anything brakes, you just have to call their number and pay a visit fee (around $50), but that is it. If they cannot fix the problem, they will replace whatever it is malfunctioning with a new one of similar quality. This is a great incentive for you as a buyer, since it will be one less thing to worry about for that first year while you learn how everything is working.
Upgrades
On new-construction, it is not uncommon to find builders these days giving as much as $70,000 in upgrades. They may range everywhere from granite countertops, mahogany or oak cabinets, travertine or wood floors and stainless steel appliances to a free pool in some cases. You must evaluate the whole range of upgrades and incentives being offered right now.
Sometimes builders will include a price-reduction incentive. However, this is tied to you using their “preferred” lender, which a lot of times is a branch of the same construction company that does the financing. In that case, it is important to compare every detail of their offers with other lenders', since you may find the builder's preferred lender may be offering you an interest rate higher than other lenders.
Repairs
After your professional inspector has completed your potential home inspection (you WILL get an inspection, won't you?!), he will uncover defects you may not have noted. It is important you uncover these during the initial inspection period (agreed upon on the purchase contract) and ask the sellers to fix these items. If they are unwilling to fix them, you can also give them an easy way out by asking for a credit worth what you will spend on fixing these items. Then you can perform these repairs yourself (whenever possible) and save some more money.
The bottom line is, we are in a buyer's market and your Real Estate agent should be ready to negotiate hard for you to get as many concessions as you can get. In this market you can always walk away to the next seller who will meet your terms.
To get your FREE copy of the detailed report I wrote for my clients, complete with tables, charts and my own personal pick of where the growth is and will be for the next few years, please visit Valle del Sol Real Estate.
About the Author
Cassie Steele on ET! Canada (2nd Album and the Degrassi Goes Hollywood Movie)
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