Category Archives: Negotiating

How To Determine A Home’s Value

Price For A Home

How Much To Pay For That Home?

Determining the value of a home is a big challenge to both buyers and sellers.

Since the seller, by virtue of their list price, has already determined the price they feel their home is worth, we will focus on helping a buyer determine value.

 

WHO DETERMINES VALUE?

In simplest terms, a home is only worth what someone is willing to pay for it. In a perfect world, a buyer would find a home, tell the seller how much they want to pay for it, the seller would easily agree, and everyone would then hold hands and sing Kumbaya.

We all now this isn’t how things work. Every buyer wants to pay as little as possible, and every seller wants as much as they can get. There is typically disagreement before an offer is even made.

For this reason, negotiating the price on a home is one of the more difficult transactions you will encounter. If you follow our tips below, this part of the process will be easier.

 

START WITH THE FACTS

There are 3 statistics that can be used to help determine value:

1. Price of Recent Sales ( Comps )

2. Average Price Per Square Foot

3. Percentage of List Price

Let’s go over each one of these starting with comparable sales.  The best way to get value is to find recent similar sales ( same neighborhood, price point, sold within 6 months ) and compare them to the home you are buying. While it certainly helps if you have personally seen these homes when they were for sale, it isn’t a must.

Start with the best recent sale and compare it to the home you want to buy. You should consider what the recent sale has/doesn’t have and make appropriate adjustments.

For example, if you are looking at a home listed for $400,000 that has a 3 car garage, and the best recent sale was $375,000 but had only a 2 car garage, an adjustment would be appropriate of $10,000-$15,000. You can do the same thing with number of bedrooms, baths, and amenities such as finished basement.

While price per square foot is not the preferred method of determining value for an appraiser, it is sometimes helpful as a secondary method just to make sure you are in the ballpark.

For example, if homes are selling for an average of $150 / sq. ft. , with the range being $125-175, paying $185 may be excessive, unless there are compensating factors. Remember, we are talking about AVERAGE price/sq. foot, so if the home you are buying is above average in your opinion ( updates, superior finishes, etc…) than paying higher in the range would be acceptable.

Finally, seeing what homes sell for in terms of sale price/final list price ( it is typically 94-96% in most areas here in Cleveland ) will give you an idea of a range in which you could expect to pay for a home that you feel is priced fairly.

If homes are selling for 95% of the value, than in the example above, paying $380,000 for a $400,000 home would be realistic. That doesn’t mean you couldn’t buy it for less, or you wouldn’t have to pay more, these figures are just used to help guide you.

 

GET RID OF THE NOISE

It is very easy for a buyer to get distracted and lose sight of the big picture.

There are many different personalities at play; buyers, sellers, agents, and often parents and friends who always want to put their two cents into the equation. Therefore, we recommend focusing on the numbers and following your instincts.

Having a knowledgeable agent to guide you is a major plus. However, at the end of the day, you are the one who ultimately makes the decisions, so you need to be comfortable with the process of determining value.

By following our advice, you will be on your way to figuring out a fair price for any home.

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ABOUT THE AUTHORS

The above information is compliments of The Schuman Team, Amy and Dan, of Howard Hanna Real Estate Services. They specialize in Solon luxury homes, relocation, and first-time buyers.

They can be reached at 216-346-3235 or 216-403-9189 or via email, danschuman@howardhanna.com or amyschuman@howardhanna.com.

The Schumans service the following Cleveland area suburbs: Aurora, Bainbridge, Bay Village, Beachwood, Bentleyville, Chagrin Falls, Cleveland Heights, Gates Mills, Highland Heights, Hunting Valley, Lakewood, Lyndhurst, Mayfield Heights, Mayfield Village, Moreland Hills, Oakwood Village, Orange, Pepper Pike, Shaker Heights, Solon, South Euclid, University Heights, Westlake, Woodmere.

How To Determine A Home’s Value is the property of The Schuman Team and may not be duplicated or used without their written consent.©May, 2015

The Importance of Earnest Money

earnest money check

When writing an offer, there are many factors that are considered to be important, such as price and closing dates. One of the often overlooked items that appear in the purchase agreement is earnest money, the topic of today’s post.

DO YOU REALLY NEED IT?

First off, earnest money, or good faith money is not required in Ohio. However, it is a way to convey your commitment to purchasing a home and is expected by local sellers. Sometimes it can even make a difference in whether or not a seller accepts an offer.

Buyers always ask us how much they should offer. There is no set rule on this although we do recommend at least 1-2% of the purchase price. So, for example, earnest money on a $300,000 offer would be $3000-$6000. Again, there’s no set rule on this and you could certainly go above or below this threshold if you’d like, it’s just a gauge we use.

Some buyers, especially first timers, are always a little reluctant to give any money up front because they often don’t understand how it works. There is actually very little risk in offering earnest money. The money is held by a third party, not given directly to the sellers. If for some reason the deal doesn’t work out for a legitimate reason, the money gets returned to the buyers.

IT CAN MAKE A DIFFERENCE

Earnest money is a way to show your commitment and can actually be a deciding factor. I have been on the listing side of a transaction where we received two offers that were similar in price. The sellers felt that the buyer who offered a significant amount of earnest money was more serious and chose to work with them.  This may be a rare case, but is something not to be taken lightly.

When all is said and done, price is likely the most important thing to a seller. However, showing your strength as a buyer can make a difference so it’s worthy to discuss earnest money with your agent.

 

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About The Authors

The above information is compliments of The Schuman Team, Amy and Dan, of Howard Hanna Real Estate Services.

They can be reached at 216-346-3235 or 216-403-9189 or via email, danschuman@howardhanna.com or amyschuman@howardhanna.com.

The Schumans service the following Cleveland area suburbs: Bainbridge, Bay Village, Beachwood, Bentleyville, Chagrin Falls, Cleveland Heights, Gates Mills, Highland Heights, Hunting Valley, Lakewood, Lyndhurst, Mayfield Heights, Mayfield Village, Moreland Hills, Oakwood Village, Orange, Pepper Pike, Shaker Heights, Solon, South Euclid, University Heights, Westlake, Woodmere.

Beware of Home Search Sites is the property of The Schuman Team and may not be duplicated or used without their written consent.

A Busy Market Requires High Sense Of Urgency

Are The Tides Changing To A Seller's Market?

We are happy to say that the real estate market here in Northeast Ohio is picking up. Inventories are low, the weather has been unseasonably warm, and the buyers are out in full force.  The rush of activity is good news to everyone, including home sellers.  However, the influx of buyers making offers has created a different set of challenges that we haven’t seen in a long time.

SLOW MARKET = NO URGENCY

Over the past few years when the real estate market was slow, the buying and selling process often took a long time. Buyers were afraid of overpaying and sellers were unwilling to accept what the market was willing to bear for their home. Basically, there was gridlock and an overall lack of urgency on all parties to get anything done.

Buyers, until recently, had been in control. The general attitude of most was that a seller would be lucky to get an offer from them. Plus, if things didn’t work out, they would just buy another home. Their level of commitment was suspect as well with some buyers preferring to just make a verbal offer instead of putting it in writing.

Negotiations also dragged out over days and sometimes even weeks. Getting parties to agree to terms was near impossible and getting all parties to sign and date the documents was more of an afterthought.  Now,  a shift in the market has taken place and those not prepared are getting burned.

TAKE QUICK ACTION OR LOSE OUT

Today’s increased activity is causing things to happen at a much faster pace than many are used to, including some agents. Anyone approaching the process in a lackadaisical manner will end up learning the hard way, when the home they want is taken by someone else.

We are not saying that buyers should make hasty decisions. We are simply recommending  that once you know what you want to do, do it quickly. Make an offer, work out the details, and get all parties to sign and date the documents as soon as possibly. This is even more critical if there is heated competition for a particular home.

NO SIGNATURE, NO DEAL

A last bit of advice. Understand that until all required paperwork is signed, dated, and/or initialed by all parties, there is no deal. We have heard many stories lately of negotiations being verbally agreed on by both buyer and seller, and then another offer comes in out of nowhere before all documents are signed. This can create havoc on an already complicated transaction and sometimes lead to costly litigation.

In the end, you need to be prepared for today’s changing market and having a great agent by your side will certainly make a difference.  Otherwise, the American dream could turn into a nightmare for you.

 

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About The Authors

The above information is compliments of The Schuman Team, Amy and Dan, of Howard Hanna Real Estate Services.

They can be reached at 216-346-3235 or 216-403-9189 or via email, danschuman@howardhanna.com or amyschuman@howardhanna.com.

The Schumans service the following Cleveland area suburbs: Bainbridge, Bay Village, Beachwood, Bentleyville, Chagrin Falls, Cleveland Heights, Gates Mills, Highland Heights, Hunting Valley, Lakewood, Lyndhurst, Mayfield Heights, Mayfield Village, Moreland Hills, Oakwood Village, Orange, Pepper Pike, Shaker Heights, Solon, South Euclid, University Heights, Westlake, Woodmere.

A Busy Market Requires High Sense Of Urgency is the property of The Schuman Team and may not be duplicated or used without their written consent.

Note: The Schuman Team are not licensed attorneys and nothing contained in this post should be construed as legal advice. We recommend that all buyers and sellers have legal documents reviewed by a qualified real estate attorney before moving forward on a real estate transaction.

Multiple Offers More Common Than You Think

 

Multiple buyers fighting over the same home is not uncommon.

Although not the norm, it is not unusual in today’s market to see buyers fighting over the same home. This is termed a “multiple offer” situation, or “multiples” in real estate agent lingo. Regardless what the media says about it being a buyers market, bidding wars do happen and seem to be taking place more frequently.

By definition, “multiples” occurs when more than one buyer is attempting to purchase the same home at the same time. This happens not only on homes that are new to the market, but also to homes that have been sitting for a long time. I’ve personally seen homes listed for over a year that ended up having multiple bidders.

The important point of this article is that a multiple offer situation can happen at any time and will present additional challenges. Regardless if you are a buyer or seller, these transactions can be much more stressful.  On the buy side, not only do you have to negotiate with the seller, but you also have another buyer to worry about.  Strategy is extremely important in this situation and one wrong move could lose you the home of your dreams.

As a seller, while most dream of having multiple bidders for their home, it isn’t as great as it seems. Buyers are often put out at being in a competitive bidding situation and if you don’t play things right, you risk alienating all of your buyers and could end up with none.

The winning party sometimes ends up having buyers remorse,  feeling they were pressured to pay more than they wanted. Some end up backing out during the inspection period because of this. Additionally, the losing party ends up very resentful of the process. They are often so angry that they rarely come back in the event that the home comes back on the market.

The fact is, in a multiple offer situation, someone losses and it creates a lot of ill will. Whether justified or not, emotions will run higher than normal here. That is why we like to avoid them when representing our buyer clients.

We tell our buyers that if they like a particular home, odds are high that some other buyers will feel the same way about it.  So, don’t hesitate to make an offer quickly or risk either losing the home or having to get into a bidding war to get it.

When it comes to multiples, understand that they do exist in all price points and could happen at any time. Remember, nice homes that are priced well don’t last very long in any market. Unfortunately,  we tell our clients this but sometimes they end up learning the hard way.

 

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About The Authors

The above information is compliments of The Schuman Team, Amy and Dan, of Howard Hanna Real Estate Services.

They can be reached at 216-346-3235 or 216-403-9189 or via email, danschuman@howardhanna.com or amyschuman@howardhanna.com.

The Schumans service the following Cleveland area suburbs: Bainbridge, Bay Village, Beachwood, Bentleyville, Chagrin Falls, Cleveland Heights, Gates Mills, Highland Heights, Hunting Valley, Lakewood, Lyndhurst, Mayfield Heights, Mayfield Village, Moreland Hills, Oakwood Village, Orange, Pepper Pike, Shaker Heights, Solon, South Euclid, University Heights, Westlake, Woodmere.

Multiple Offers More Common Than You Think is the property of The Schuman Team and may not be duplicated or used without their written consent.

The Inspection Process And Why It’s So Stressful

The home inspection process will make or break a transaction. It is by far the most important  step for both buyers and sellers. The following post will explain the process and offer some advice to make it easier for you.

The home inspection processHere are some basics about inspections. They are done to protect the buyer by informing them about the condition of the home and to uncover any defects. A thorough inspector will also take the time to educate the buyer about the home and how to properly care for it. We highly recommend a home inspection to anyone buying a home.

Historically, inspections were meant to put heavy focus on uncovering very specific things relating to structural defects or health and safety issues. These include things like mold in an attic, radon gas, or large cracks in a basement wall. Sellers typically offered to address these items as standard protocol.  It was a more simple process in the past.

Today, buyers seem to be asking for everything under the sun, even things they were aware of when they walked through the home ( broken outlet cover, rip in screen door, etc..). Now, the inspection typically results in round 2 of negotiations.

Usually, it is not what comes on the report that causes problems, but how the buyer deals with the information. Some buyers are more alarmist than others. Which brings us to our next point: emotions are at an all-time high during this phase of the process.

The inspection period occurs when buyers’ emotions are at a heightened state.  Buyers are initially very exited about their new home. After a few days pass however, additional feelings creep in such as nervousness, anxiety, and sometimes even buyer’s remorse ( did we pay too much, is this really the right house…). These are natural and every buyer feels them, some just handle the emotional aspect better than others.

Buyers can become more emotional and less rational when dealing with items that appear on an inspection report. The sellers in turn become defensive upon seeing a laundry list of petty items. It then becomes a long drawn out process, often worse than the original negotiations.

THE SOLUTION

We communicate to our buyers to offer a price based upon what they see when they walk through the home and what has been disclosed by the seller. If you are aware that there is a cracked window, or a broken screen door, either address it up front or factor it into the price.  If you know the roof is 24 years old, factor a new one into the price. Don’t wait until it shows up on the inspection report and then use it as a way to re-negotiate a better price. This is a little disingenuous to the negotiation process.

When it comes to addressing inspection issues, try to focus on health and safety issues or structural defects that were not previously disclosed.

Also, we believe it is best to respond to the seller as quickly as possible. Although the standard contract will typically give you a certain number of days to respond to the seller ( in Ohio it is 3 days ), waiting until the last minute and dragging the process out may do more harm than good. If you really want the sellers to do something, making them wait on pins and needles for three days is not the best way to get their cooperation.

The inspection process has become the most important phase of the buying and selling process. What happens here will often determine whether or not a transaction  ends up closing. Remaining calm and focusing on the big picture will often get you through it. That, and of course the help of a good agent.

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About The Authors

The above information is compliments of The Schuman Team, Amy and Dan, of Howard Hanna Real Estate Services.

They can be reached at 216-346-3235 or 216-403-9189 or via email, danschuman@howardhanna.com or amyschuman@howardhanna.com.

The Schumans service the following Cleveland area suburbs: Bainbridge, Bay Village, Beachwood, Bentleyville, Chagrin Falls, Cleveland Heights, Gates Mills, Highland Heights, Hunting Valley, Lakewood, Lyndhurst, Mayfield Heights, Mayfield Village, Moreland Hills, Oakwood Village, Orange, Pepper Pike, Shaker Heights, Solon, South Euclid, University Heights, Westlake, Woodmere.

The Inspection Process And Why It’s So Stressful is the property of The Schuman Team and may not be duplicated or used without their written consent. ©February,2012

Stop Negotiating Like A Child

negotiating real estate like a child

Bringing buyers and sellers together is more difficult today than ever before. Buyers want it all and sellers are sick and tired of seeing their equity disappear. Negotiating in this market can be especially challenging when one of the parties or even the other agent, negotiates like a child.

Don’t get me wrong, children can be great negotiators, especially when it comes to wanting an extra dessert or staying up past their bedtime. However, those of us that have kids can attest first hand that their arguments are illogical and tactics can be downright, well, childish.  While negotiating between adults is usually a little more civilized, there are times when I feel like I’m dealing with a five year old.

THE PROBLEM WHEN EMOTIONS RULE

At the end of the day, negotiations are about money and to some extent winning. This alone can make even the most level headed person become emotional, and that’s ok. However, when you let your emotions and ego overtake your logic and decision making ability, that’s when you get into trouble.

I couldn’t tell you how many times I’ve seen someone let their emotions get the best of them. They become  so wrapped up in the personal side of the transaction that they lose sight of what they are trying to accomplish.  They start to talk about “the buyer this”, or “the seller that” and end up spending more time and energy discussing the other party than focusing on the  transaction or solutions to the problem.

Some folks get so emotional that they really end up thinking and acting like a child.  They practically kick and scream and make ridiculous statements that  usually end up being counter-productive to bringing the sides together.  If I could record their conversations and play them back to them, I’m convinced they would be quite ashamed at their behavior.

STAY CALM AND GET WHAT YOU WANT

No matter how riled up someone gets, I am always the calm during the storm, the rudder of the ship. I believe a real estate agent can and should be able to  detach themselves emotionally so they can help bring people together.

I realize that our clients want us to fight hard to get them what they want, and I completely agree. However, that doesn’t mean we have to take on their emotions to do it.

Making demands of the other party or idle threats that “we want this or else” just aren’t effective.  Those tactics may work once in a while for a little kid, but there is no place for them in a business transaction.

If you want to be angry because the buyer or seller isn’t cooperating, go ahead and take it out on me.  Let it all out if that makes you feel better. But in the end, take a step back, look at the big picture and stop acting like a child. If you don’t, you’ll end up doing more harm than good.

After all, winning the battle but losing the war is not an effective strategy for home negotiations.

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About The Authors

The above information is compliments of The Schuman Team, Amy and Dan, of Howard Hanna Real Estate Services.

They can be reached at 216-346-3235 or via email, danschuman@howardhanna.com or amyschuman@howardhanna.com.

The Schumans service the following Cleveland area suburbs: Bainbridge, Bay Village, Beachwood, Bentleyville, Chagrin Falls, Cleveland Heights, Gates Mills, Highland Heights, Hunting Valley, Lakewood, Lyndhurst, Mayfield Heights, Mayfield Village, Moreland Hills, Oakwood Village, Orange, Pepper Pike, Shaker Heights, Solon, South Euclid, University Heights, Westlake, Woodmere.

Stop Negotiating Like A Child is the property of The Schuman Team and may not be duplicated or used without their written consent. ©October,2011