3 Way's to Avoid Regretting Your Next Real Estate Deal
You just struck a deal on some prime real estate you own or want to own but now you have a sinking feeling in the pit of your stomach. Beads of sweat cloud your brow. You imagination runs wild and you faintly hear what could be the weeping sound of a violin "strumming your pain". Your mind starts racing over the numbers of the real estate sales offer and you are overcome with an unpleasant sensation... regret.
There are three main types of regret that Laudon and Traver (2012) ascribe to auction sales but we in the real estate sales world know these sentiments are common among the various versions to construct a home sales deal, including but not limited to auction sales format (p. 738).
Many are familiar with the term buyer's remorse in relation to purchasing goods that cannot easily be returned (at least not at the same value that it was sold) such as when buying a car. Buyer's remorse (also know as winner's regret in instances where the buyer is in a multiple offer situation where one or more other potential buyers are vying for the same real estate property) is a sensation that washes over a buyer after the thrill of trumping the other buyers' offers fades and the buyer comes to the realization that he has overpaid.
Or, maybe the buyer distrusts the process and believes that the multiple offers from several other buyers is a hoax. Sometimes the seller may enlist a fraudulent ploy under the guise of having "several offers from very serious buyers" to boost what is offered on a particular home but in the cases where the seller spoke the truth, buyers may suffer from loser's lament once the buyer of the home is announced to be some other bona fide buyer. Loser's lament is when a buyer is faced with the stark truth that their offer was bested by someone else. But worse yet, is that the buyer was willing to submit a better offer but did not because he expected the seller to engage in a back-and-forth, dance-like negotiation with him, regardless of the other alleged, viable offers. This can be a heartbreaking experience that leaves a buyer comparing every other prospective purchase with "the one that got away".
There is also seller's lament, where the seller accepts a purchase offer for his home but later wonders and is remorseful that he went with "bird in hand" instead of waiting to see if the "two in the bush" would offer and net him a higher profit from the final sale.
Obviously, buyers and sellers can emerge from the dust of a real estate deal with regrets and feeling like they got the "short end of the stick". But this does not have to be your fate for your next real estate transaction, whether you are the home buyer or home seller. Here are three important ways to not regret your next real estate deal.
We love our neighbors. They can be great sources of security, friendship and even information on the latest real estate sales in the area. But they may not always have the most accurate real estate scoop. Accordingly, the Russian proverb "doveryai, no proveryai", which simply translates to "trust, but verify" should be heeded!
Don't list your home or make an offer, with out understanding the accurate prices of recently sold similar real estate. Verify recent home sales prices, days on market, closing costs paid and other transaction deals (i.e. a Market Analysis) for FREE through your local real estate Agent+ (what we like to call a professional, savvy agent who is likely a REALTOR). Your local Agent+ will happily prepare a custom market analysis based on the most up-to-date public data for you that can help you eliminate the guess work of knowing what is selling in your neighborhood.
Most importantly, this market analysis will arm you with the most superior publicly available data and no, I am not talking about Zillow Zestimates. Sidebar: Zillow blatantly, self-proclaims to all its website visitors that its Zestimates are not perfect and even gives (for many locations) the degree of inaccuracy - yikes. Due to its margin of error, it's best to skip Zillow to probe the values in a neighborhood you are considering purchasing in or for your own home's evaluation and go straight to the source, the public tax record and your local Multiple Listing Service (MLS), which is what your Agent+ typically will base your market analysis on unless there are truly no comparable homes.
Once you know the numbers in your local market, devise a plan on what numbers are specifically acceptable to you for this real estate deal. You can and should do this whether you are buying or selling.
As a seller, you should determine what is the least amount you are willing to take based on fair market value from the market analysis your Agent+ created for you. Your absolute minimum should not be abstractly based on what you paid for the home, what you have invested in the home and what you always wanted to sell the home for - yes, these things are factors but let your Agent+ help you to attribute the proper value to your improvements to the home or anything else that may affect its value.
For example, your home may be in a popular live/work hub, allowing residents to reach restaurants, work, shopping and transportation all within just a few steps - and this may be more so than the comparables. This is where your Agent+ can truly become a valuable resource helping you to further quantify beyond the public records. By the way, if you are an agent looking to be able to fine-tune these type of assessments, be sure to check out our next no fee webinar where we review a fee mobile app that can help.
As a home seller, you should also identify what your real estate "sweet spot" is (i.e. the offer price that you can happily walk away from your home). In identifying this sweet spot, be sure to stick with it! Sometimes, we as sellers, can become greedy and keep holding out for more but many times we lose out because either the home stays on the market longer and the delayed time may be equivalent to or greater than the additional profit made, or the buyer with the best offer bales for something else.
As a home buyer, you can determine from the market analysis if the current price the seller is asking for is fair, a bargain or a price gouge. Then using your market analysis, you can submit a reasonable offer to the seller. If the seller has priced the home excessively, sometimes a logical presentation of why the home is overpriced, using the concrete data of the market analysis, can sway the seller to meet you at your desired price or at least meet you somewhere in the middle. As a buyer, remember the seller is probably emotionally attached to the home (maybe it is where children were raised, etc.) so having numerical evidence of similar homes sold recently will be a key, persuasive strategy.
The final blow to real estate seller's lament is forged when sellers refuse to ignore a prospective buyer's qualifications, which should be analyzed just as much as the buyer's offer on the home. This means that the buyer should present with his home purchase offer either a bank statement or letter (signed on bank letterhead) attesting to his ability to purchase the home cash that is no older than the past 30 days. Or, if the buyer needs financing, the buyer should present a lender pre-approval letter. In either instance for cash or financing, the bank representative listed should be called to confirm the veracity of the letter because sadly in today's electronic world with various PDF editing apps around (I won't name names lol), such documents can easily be tampered with, extending dates and changing amounts, making this fraudulent practice more common than you may believe.
On the home buyer's side, nothing can be more disappointing than having been told you were "pre-qualified" to buy then following suit by negotiating a savvy deal, spending money on inspections and appraisals and being told the week of closing there is a problem with your getting the loan.
Therefore, make sure you go beyond a pre-qualification letter (where the lender may just ask you for your income and credit score without actually examining your bank statements, pay stubs, credit report and the like) and get a pre-approval letter (where the lender has delved much more thoroughly into your finances). Yes, this is obtrusive when you have not even found the home you want yet. Yes, this can be annoying to have to hunt down and then copy front and back of every page of your bank statements and other financial documents. But these short-term inconveniences will hopefully save you the heartache and monetary lose of having your moving truck outside of the closing office while the lender is unable to give you the funds to close, leaving you to scramble to arrange other housing (this does happen!).
Regret is "minimized when sellers and buyers have a very clear understanding of the prices" (Laudon & Traver, 2012, p. 738). Thus, to avoid the buyer/seller blues later, real estate buyers and sellers must take the emotion out of the house hunting and selling process to examine accurate (instead of speculative) market values, strategize on how to use those numbers and then make sure financing or cash is available to close the deal.
Follow me on Google+ and Facebook for more business growth tips and musings. Here's to your success!
Reference: Laudon, K. C. & Traver, C. G. (2012). E-commerce: Business. Technology. Society (8th ed.). Upper Saddle, NJ: Pearson Education Inc.
Obviously, buyers and sellers can emerge from the dust of a real estate deal with regrets and feeling like they got the "short end of the stick". But this does not have to be your fate for your next real estate transaction, whether you are the home buyer or home seller. Here are three important ways to not regret your next real estate deal.
Trust But Verify
We love our neighbors. They can be great sources of security, friendship and even information on the latest real estate sales in the area. But they may not always have the most accurate real estate scoop. Accordingly, the Russian proverb "doveryai, no proveryai", which simply translates to "trust, but verify" should be heeded!
Don't list your home or make an offer, with out understanding the accurate prices of recently sold similar real estate. Verify recent home sales prices, days on market, closing costs paid and other transaction deals (i.e. a Market Analysis) for FREE through your local real estate Agent+ (what we like to call a professional, savvy agent who is likely a REALTOR). Your local Agent+ will happily prepare a custom market analysis based on the most up-to-date public data for you that can help you eliminate the guess work of knowing what is selling in your neighborhood.
Most importantly, this market analysis will arm you with the most superior publicly available data and no, I am not talking about Zillow Zestimates. Sidebar: Zillow blatantly, self-proclaims to all its website visitors that its Zestimates are not perfect and even gives (for many locations) the degree of inaccuracy - yikes. Due to its margin of error, it's best to skip Zillow to probe the values in a neighborhood you are considering purchasing in or for your own home's evaluation and go straight to the source, the public tax record and your local Multiple Listing Service (MLS), which is what your Agent+ typically will base your market analysis on unless there are truly no comparable homes.
Now Use Those Numbers!
Once you know the numbers in your local market, devise a plan on what numbers are specifically acceptable to you for this real estate deal. You can and should do this whether you are buying or selling.
As a seller, you should determine what is the least amount you are willing to take based on fair market value from the market analysis your Agent+ created for you. Your absolute minimum should not be abstractly based on what you paid for the home, what you have invested in the home and what you always wanted to sell the home for - yes, these things are factors but let your Agent+ help you to attribute the proper value to your improvements to the home or anything else that may affect its value.
For example, your home may be in a popular live/work hub, allowing residents to reach restaurants, work, shopping and transportation all within just a few steps - and this may be more so than the comparables. This is where your Agent+ can truly become a valuable resource helping you to further quantify beyond the public records. By the way, if you are an agent looking to be able to fine-tune these type of assessments, be sure to check out our next no fee webinar where we review a fee mobile app that can help.
As a home seller, you should also identify what your real estate "sweet spot" is (i.e. the offer price that you can happily walk away from your home). In identifying this sweet spot, be sure to stick with it! Sometimes, we as sellers, can become greedy and keep holding out for more but many times we lose out because either the home stays on the market longer and the delayed time may be equivalent to or greater than the additional profit made, or the buyer with the best offer bales for something else.
As a home buyer, you can determine from the market analysis if the current price the seller is asking for is fair, a bargain or a price gouge. Then using your market analysis, you can submit a reasonable offer to the seller. If the seller has priced the home excessively, sometimes a logical presentation of why the home is overpriced, using the concrete data of the market analysis, can sway the seller to meet you at your desired price or at least meet you somewhere in the middle. As a buyer, remember the seller is probably emotionally attached to the home (maybe it is where children were raised, etc.) so having numerical evidence of similar homes sold recently will be a key, persuasive strategy.
Let Pre-Approval Rule
The final blow to real estate seller's lament is forged when sellers refuse to ignore a prospective buyer's qualifications, which should be analyzed just as much as the buyer's offer on the home. This means that the buyer should present with his home purchase offer either a bank statement or letter (signed on bank letterhead) attesting to his ability to purchase the home cash that is no older than the past 30 days. Or, if the buyer needs financing, the buyer should present a lender pre-approval letter. In either instance for cash or financing, the bank representative listed should be called to confirm the veracity of the letter because sadly in today's electronic world with various PDF editing apps around (I won't name names lol), such documents can easily be tampered with, extending dates and changing amounts, making this fraudulent practice more common than you may believe.
On the home buyer's side, nothing can be more disappointing than having been told you were "pre-qualified" to buy then following suit by negotiating a savvy deal, spending money on inspections and appraisals and being told the week of closing there is a problem with your getting the loan.
Therefore, make sure you go beyond a pre-qualification letter (where the lender may just ask you for your income and credit score without actually examining your bank statements, pay stubs, credit report and the like) and get a pre-approval letter (where the lender has delved much more thoroughly into your finances). Yes, this is obtrusive when you have not even found the home you want yet. Yes, this can be annoying to have to hunt down and then copy front and back of every page of your bank statements and other financial documents. But these short-term inconveniences will hopefully save you the heartache and monetary lose of having your moving truck outside of the closing office while the lender is unable to give you the funds to close, leaving you to scramble to arrange other housing (this does happen!).
Regret is "minimized when sellers and buyers have a very clear understanding of the prices" (Laudon & Traver, 2012, p. 738). Thus, to avoid the buyer/seller blues later, real estate buyers and sellers must take the emotion out of the house hunting and selling process to examine accurate (instead of speculative) market values, strategize on how to use those numbers and then make sure financing or cash is available to close the deal.
Follow me on Google+ and Facebook for more business growth tips and musings. Here's to your success!
Reference: Laudon, K. C. & Traver, C. G. (2012). E-commerce: Business. Technology. Society (8th ed.). Upper Saddle, NJ: Pearson Education Inc.
