It is often said that we are in a “buyers’ market”; but what does that actually mean for those of us looking to purchase or sell a home? While the obvious answer is an increased amount of negotiating power for the purchaser, it does not mean that a prospective homebuyer can simply cast a wide net and wait for an amazing deal to fall into their lap. Equally, there are actions that a seller can proactively take to mitigate the disadvantages of a “buyers’ market”. In today’s current market, depending on whom you speak with, it could be either a buyers’ or a sellers’ market. Our advice to clients therefore is to adopt the mindset of an investment banker. Curious? Here are a few techniques that could very well work to your advantage:
Identify the purpose of your purchase:
Do you plan to hold on to the property for only a few years or do you view the purchase as a long-term investment? If you know that you will be moving again in the not-too distant future, look for communities that are up and coming and areas that will present a higher yield and increase in value in a shorter amount of time. If your goal is a long-term investment, pursue a property in an established neighborhood and look at alternative options, such as co-op buildings, where your money will buy you more space and immediate value stability – co-ops tend to have more stringent financial requirements than a bank.
Do your due diligence:
In many states, attorneys are not required to participate in a real estate transaction; however, even in those markets, a buyer should consider engaging the services of an attorney who can provide them legal counsel far beyond the standard property disclosure statement and precious guidance in navigating what can be a complex process. While sellers are required by law to truthfully answer questions about a residence, many homeowners are not aware of all the defects in their own home. Many components of a home can wear out over time, or the seller may have bought the property decades ago, and any issues present when they bought the home may have been forgotten about. This is why it is critical to engage a licensed home inspector to help identify elements that need to be replaced or repaired when buying a single-family home or townhouse in NYC. Note: Different states have varying disclosure requirements. For instance, in NYC it is not common to do a home inspection in condos and co-ops. Normally, the buyer’s attorney will review the offering plan, building financials, house rules, and minutes from past board meetings and this is considered equivalent to an inspection report. But always rely on your professional real estate advisor to guide you through the process along with you your legal counsel.
Consider the tax implications:
With all the recent property tax changes in NY State, it is now more important than ever to look carefully at the tax implications of any home purchase. While it may not exactly feel like you are buying a “mansion”, any property above $1M in NYC is subject to the NYC Mansion Tax, which now ranges between 1% to 3.9% of your purchase price. This tax applies to all residential properties, including co-ops, condos and single-family homes up to three units.
Research the competition:
With the plethora of resources on the internet, sellers can seemingly quickly gather an estimate of their property’s value; it’s as easy as typing in a property address, and like magic, an abundance of information pops up in front of their eyes. However, sadly it isn’t quite that easy! This is an example of where a real estate professional can help in correctly analyzing and sifting through this maze of information to decipher what is real and assist the seller in correctly pricing their home to sell in the shortest amount of time and for the highest profits. We recommend that you prepare for your initial meeting with a real estate professional so that you empower yourself with knowledge as this will allow you to ask the right questions and derive the most value from this professional. You could start by asking them why a market analysis consists of three prongs of data gathered from – Active, Under Contract and Closed Properties. How is this data used exactly to price my home? How will each of these categories affect the marketability of my home? How do other sellers sometimes use the same data to compete against my home, etc.? We can’t highlight enough how pricing your home for a sale is one of the most important strategies in the entire process. No amount of marketing and advertising and Open Houses can replace value. And remember that, at the end of the day, this is a financial transaction.
Check your emotions at the door:
Intellectually, we all know that the market determines values; however, when it comes to our own home, sometimes it is difficult to accepts market facts that might differ from what we originally anticipated. For example, the market conditions change causing property values to decline or when the market shifts from a sellers’ market to a buyers’ market. These are called “outside influences”, things that you, as a seller, cannot control. On a positive note, there are however several things that you do maintain control over – one of them being your emotions. It really is vital to remove emotion from the sale of your home. A real estate professional is a great person to help you create that distance between your emotions and a potential buyer which can result in selling for the best price. Why is this? Because when emotions kick in and that little voice begins to chime in: “but my home is better quality construction”, “I have top of the line appliances”, “our marble floors came from a private quarry in Italy” … suddenly, all that in-depth market analysis and research goes out the window and your property is suddenly worth more than anyone else’s for sale. This is precisely the moment when your “investment banker” thinking comes into play, bringing you back to a buyer’s mindset and you will be asking yourself the same questions. Why am I selling? Do I have to sell right now? Should I hold on to this asset until the market is more in my favor? And just like a buyer, you will intuitively know if you should sell immediately, in six months or even later.
Prep Your Home and think like a “Debutante”:
When selling your home, think like a Debutante – you know that a Debutante only comes out once! Your home needs to be the best in class, giving it the greatest opportunity to sell at the highest and best price. We recommend the following easy steps to prep your home for success: hire a professional company to do a deep cleaning and de-cluttering. Neutralize color palettes and remove personal family photographs or your favorite stuffed pillow or toys. It may be worth your while to take on a spot of remodeling and staging but always check first with your real estate professional about which renovations and upgrades are likely to increase the property’s value and be worth the investment.