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Home Buying Today: How to avoid the mistakes and beat the other buyers!
F206Z was presented via George Mason University's
Osher Lifelong Learning Institute on February 15, 2023.
This analytical talk incorporates 35 years of statistics and experience, and includes critical details on the home buying process you can share with family and friends. It includes information you will hear nowhere else. David will also clear up misconceptions about the best month for home buyers, discuss the pros and cons of hot market tricks, and show you how to use the escalation addendum in a way that few others understand.
Click here for a link to all David's GMU talks.
Click to read David's Buying a Home book free online NOW.
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The course outline below has active links to additional information.
Avoid the mistakes and beat the other buyers!
- This outline has active links!
- Today's Northern Virginia Market
- Hot and cold markets – today's sellers' plan and today's buyers' plan
- David's online searching ideas were detailed in June 2022 by nationally-syndicated columnist Lew Sichelman.
- David's ideas for beating other buyers were detailed in June 2021 by nationally-syndicated columnist Lew Sichelman.
- Subscribe to David's free monthly market report and newsletter email
- Email David at david@DrRealEstate.net
Online searching
- The agent that pops up is rarely the listing agent
- There are dozens of sites - all get their data from our MLS
- Be sure your results mean what you think they mean
- Reasonable assumptions can be way off
- Be sure that promising properties are not excluded
- Required fields
- Optional fields that can be left blank
- Fields populated automatically by the system
- Data selected from "pick lists"
- Information entered by "lookup" functions
- Information entered manually, which is iffy
- You are at the mercy of the online provider
- You are at the mercy of the computer-literacy of the agent
- There are hundreds of fields with thousands of entries
Online searching
Very reliable search fields- MLS Number
- County / City
- ZIP code / Postal City
- List Price
- Year Built / Age
- Lot Size (acres / square feet)
- Select Status - Active / Available / For Sale
- Property Type: Detached / Townhouse / Condo
- Bedrooms
- Baths - Half-baths can be noted, ignored, or rounded-up
- Style (i.e. colonial, 2-story, split-level, ranch, etcetera)
- Fireplaces
- Garage / Parking
- Schools
- Levels / Stories / Floors
- Neighborhood / Subdivision
- Rooms (Den, Sun Room, etcetera) .
Online searching
Don't search fields subject to ambiguity, inaccuracy, or judgment- Basement (can be misleading)
- Square Feet (can be very misleading)
- Days on the Market (can be grossly misleading)
- The focus is on finding homes to visit
- Automated value estimates (Zillow, etcetera) are worthless
- Many sites download information in real time, some weekly
- There are no perfect search sites but one is recommended . . .
- https://brightmlshomes.com
- Review online photos with caution
- A virtual tour can be invaluable
There are no perfect consumer home-search sites but you should try Bright
- The data comes directly from the source with no middleman
- New or changing data appears here within minutes (not days or weeks)
- A click for an agent should get you to the actual listing agent who knows something about the property
- Avoid delays associated with asking an agent from a random company or one who has to pay realtor.com or Zillow in order to hook a buyer
A typical disclaimer: All information, regardless of source, should be verified by personal inspection and/or with the appropriate professional(s). The information is not guaranteed. Measurements are solely for the purpose of marketing, may not be exact, and should not be relied upon for loan, valuation, or other purposes.
Beat the other buyers - overview
- Aim for a final data set of 30 to 60 homes sold for over 100% of asking price.
If less then 30, loosen the criteria. If greater than 60, tighten the criteria.
Sold and final asking price data is required from the MLS. - Select a jurisdiction (County or City)
- Select a time period – 4 to 8 weeks
- Tailor the data set . . .
— Select only Detached homes or Townhomes or Condominiums
— Select only homes in your price-range
— Select only homes in certain zip codes
— Select a shorter time period - Divide the selling-prices by the asking-prices and save the homes sold for over 100%.
- If there are less than 30 sold homes, relax the constraints to obtain 30 or more
- Sort the results in descending selling-price to asking-price order
Beat the other buyers
Beat the other buyers - an example
- Detached homes under $1 million in Fairfax
- Closed during 30 days in June and July 2022
- Buyers paid from 93.8% of asking to 114.5%
- 71 sold homes total – 42 paid over 100% of asking price
- 42 ÷ 71 = 59% had to fight other buyers
- But for YOU it will be 0% or 100%
- Only one cash buyer of the 71 – normal is 10% to 20%
- The effect of financing
- Offer 10% over asking for a 90% chance
- Offer 6.5% over asking for an 80% chance
- Offer 3.2% over asking for a 50% chance
- Alternatively, try again next year
Beat the other buyers
42 Buyers faced competition.
The top 21 are shown in descending percent order.
Count down 4.2 from the top for a 90% chance: 10% over.
Count down 21 from the top for a 50% chance: 3.2% over.
Fine tuning: You can interpolate, but why?
Hot market tricks!
If you are buying a home in a hot market, you will compete with other buyers, some of whom will . . .- Pay cash
- Offer a higher price than the asking price
- Use the escalation addendum
- NOT ask the seller to provide a one-year warranty
- Waive the financing contingency
- Waive the appraisal contingency
- Waive the home inspection
- Do a home inspection for information purposes only
- Forego a lead-based paint inspection
- Forego a mold inspection
- Forego a radon inspection
- Accept the property in as-is condition
- Forego a final (walk-through) inspection
- Waive the contingency for lender-required repairs
- Offer the seller a free rent-back period after closing
- Accompany their offer with a $5,000 nonrefundable deposit
Escalation Addendum
The 2 blanks should NEVER be filled in with round numbers.
NEGOTIATING TACTICS
- Information is power
- Emotion (don't nuke the process)
- Reasonable & customary & red flags
- Planning the offer
— Time on the market
— Time at this price
— Selling to asking price
— Supply and demand
— Market index
— Time of year
— Tax assessments
— Zillow etc! - New homes procedures
THE MARKET INDEX
The market index represents the months supply of resale homes and measures the ratio of home buyers to home sellers.
Below 1.5 is a hot sellers' market;
1.5 to 3.0 is a normal sellers' market;
3.0 to 5.0 is a neutral market;
above 5.0 is a buyers' market.
MARKET SEASONALITY
Data for this chart is based on contracts entered in order to be timely. Closings are old news and tracking them will put you a at least a month or two out of synch, maybe 3 or 4 months!
NORTHERN VIRGINIA
All aboard?
TMI ???
- Smart Negotiating
- Decades of Timely Topics
- David's quotes in the national news
- Newspaper cover stories and series written by David
- David's articles for Realtor Magazine and other publications
- The Buying a Home book free online
- The Agents Guide book
- The Statistics PERSPECTIVE for the Experts book
BUYING A HOME — The End
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Information is POWER
- What sounds right can be wrong!
- Most news is recreational, NOT actionable
- Facing competition? Don’t miss this!
- Making an offer? Don’t miss this!
- Searching online? Don’t miss this!
- First-time buyer? Don’t miss this!
- To buy or to rent? Don’t miss this!
- About David
- Sign up for the free monthly market report and news email
- Questions? — Email David at david@DrRealEstate.net
- A Home $elling course link is available on request
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