After years of hearing about the impossibility of finding a good house at a decent price in Madison, Kate Zurlo-Cuva and Jeremy Kraft were pleased to get just the place they wanted only a month into their house-hunting expedition.
'We felt unbelievably lucky to find a house that we were comfortable with and that was in a neighborhood we wanted,' says Zurlo-Cuva about the two-story, three-bedroom home they bought in the Tenney-Lapham neighborhood last November for $25,000 under the original asking price. 'There is no way we would have gotten this house two years ago.'
Because there were some repairs that needed to be made, they were able to bring down the price some more and get the previous owner to fix 'a bunch of things for us.'
Zurlo-Cuva and Kraft had looked at several other houses that had significant structural problems, and knew that they would have had more leverage in those situations, but decided to go with the house that did not require as much renovation.
'We purchased our home in November, when sellers are starting to worry,' says Zurlo-Cuva, who felt that was to her advantage in negotiating.
Following a decade of increasing home prices, the Madison real estate market calmed down last year. Dane County home sales dropped 11% from 2005 to 2006, according to South Central Wisconsin Multiple Listing Service (MLS), an inventory of homes being marketed through Realtors. Median house prices dropped slightly, from $219,900 in January 2006 to $217,900 in January 2007, after years of steadily increasing prices.
Part of the slow-down is due to the number of new condos. At the end of January, there were 5,021 homes on the MLS ' almost half of them condos ' compared to 4,040 homes a year ago and just 2,557 in January 2005.
'Our buyers were rather pleased that the market had shifted in their favor for a change,' says Jan Byrne, an agent with Restaino Bunbury and Associates. 'They were really, for the first time in many years, in a position of negotiating power.'
If you're looking for a house, how do you best take advantage of the more buyer-friendly market? And if you're selling, can you still hope to make enough money to make the process worthwhile? A lot of it comes down to how well you or your agent can negotiate.
It may be a buyers' market, but that doesn't mean the house of your dreams will be a steal. The median home price is still about 10% higher than in 2005. You still need to do all you can to get a house you like for a price you can live with.
Get preapproved for a loan. With preapproval, sellers know that they can accept your bid with less risk of the deal falling through. It's proof that your financial institution has thoroughly researched your income, credit history and assets and pledges to provide you with a home loan up to a certain amount. (This is different from prequalification, which offers no such guarantees.) 'Once you find that house that you want, you're going to move ahead of the line [because] the seller doesn't have to wait for anything,' says Mark Fairfield, who manages the mortgage consulting team at Summit Credit Union. Many sellers are willing to consider a lower bid from someone with preapproval over a higher bid from someone without.
Timing is everything. 'Two-thirds of all homes sell in the first seven months of the year,' says Eric Reusch, a real estate agent with Restaino Bunbury and Associates and regular contributor to RealtyTimes.com. If you want to benefit from sellers who are tired of having their houses on the market and eager to get rid of them, even at a reduced price, wait until late summer or fall to start house shopping.
Know your reasons for buying. If you are buying strictly as an investment, you can simply walk away if your bid isn't accepted. Most people have more complicated desires, including location, school district and room to grow ' or you may have just 'fallen in love' with the house. If you know what you want and why, you can consider counteroffers more objectively.
Be reasonable. 'Buyers sometimes feel like they've been hearing that the bubble's over and that it's a buyer's market, they can go in and bid at much lower than asking price,' says Reusch. Offers far below the market rate are likely to be rejected.
Know when a deal isn't. If there are repairs that need to be made, make sure any price reduction offered by the seller is ample enough to cover all associated costs. You're not saving money if the previous owner just passes problems ' and their expenses ' to you.
A seller can also do plenty to end up with a good offer.
Go to market early. Since most people buy houses in spring and early summer, the next few months offer the best chance of receiving multiple bids.
Offer perks. Reusch says sellers have started adding more incentives like covering closing costs, prepaying condo fees for six months or throwing in maintenance tools like snowblowers and lawnmowers. He has even seen some sellers offer higher-than-average commissions to real estate agents. Stiegler says she now sees more sellers having their homes pre-inspected and pre-appraised.
Time or money? Is your primary goal to make a certain profit, or to sell your house within a set time frame? Knowing which is more important to you will help you frame negotiations to your advantage.
Don't be greedy. Ultimately, the market sets the price. Just because your neighbor sold an identical house for $200,000 in 2005 doesn't mean you can expect $220,000 this year. Price your house reasonably, be patient, and your house will sell.
With buyers gaining a greater advantage in the Madison real estate market, 'you have to do something to make your house stand out,' says Jill Stiegler, a Realtor with the Stark Company. One of Stiegler's specialties is 'home staging': arranging colors and objects to increase a property's appeal. Staging 'can really be done on a minimal budget,' says Stiegler, with or without the help of a professional.
Clean it. Cleaning is all some houses need before they are put on the market, says Stiegler. Put out an immaculate welcome mat and wash or repaint the front of your house to make a good first impression. Wash your windows. Have carpets professionally cleaned. Scrub your kitchen and bathrooms before each showing.
Clear it. Generally, it's a good idea to remove 50% to 75% of furniture from any room and at least half the knick-knacks and books from horizontal surfaces. Remove all appliances from kitchen counters. Hide electrical cords. Take down personal photos, religious art and anything that hints at your political views.
Say 'no' to visual clutter. Busy wallpaper or murals can be distracting to viewers and make it difficult for them to imagine their own possessions in the space. Repainting can calm things down. Furniture and wall colors should work together. Move the red plaid lounge chair out of the green living room, or at least put a green or neutral slipcover over it. Outside, prune any shrubs hanging over the walkway or blocking the windows (unless, of course, said shrubs were planted to block a view of the local porn shop).
Let it flow. This aspect of staging is 'a Westernized feng shui,' says Jan Byrne of Restaino Bunbury. Flank the stoop with potted plants so visitors are drawn to the front door. Place furniture so visitors don't have to walk around it as they amble from room to room. Make sure no doorways are blocked. If there are steps down or up between rooms on the same level, place visual cues so a potential buyer doesn't feel unsure of her footing.
You want people to feel comfortable enough to imagine your house as their home. 'When people walk in through the door, they need to be able to say, 'I can live in this house,'' says Stiegler.