The "hard" evidence that sellers can use like weapons to defend their asking price sometimes overwhelms and intimidates buyers. Be prepared to let seller's defenses roll off your back without
Compromising your position. Willingly, sellers will bring out appraisals, market-value estimates by real estate agents, computer printouts of homes sold in the neighborhood, and cost reciepts of improvements that have been made.

Be prepared to attack as follows:

An Appraisal: No matter how expert the appraiser, he or she can't put a price on your home. No one can ever understand all the factors that are important to you. An appraiser judges what's important to him or her.

Market-Value Estimate by a Real Estate Agent: Giving free market evaluations is the way real estate agents get business. It's a device to butter up sellers and entice the sellers to "come list with me." As such, agents wanting to ingratiate the most give maximum, sometimes outrageously high, market-value prices.

Computer Printouts of Homes Sold in the Neighborhood: Interesting. Worth looking over. Usually these lists are limited to homes sold by real estate companies, not by owners. Sometimes homes on the list are carefully selected to justify a higher price.

Cost Receipts of Improvements Made: Again, interesting. But not necessarily suited to your needs. I know buyers who paid more for a home without the extra finished room. They didn't want to have to keep up the extra space.

This Tip was excerpted from:
Buying More House for Less Money,By Cecil Lohmar, Probus Publishing Company, 1990
ISBN# 1-55738-162-3

It is rare, particularly when dealing with older houses in need of renovation, that a seller expects to receive the asking price of the house. It is up to you, the buyer, to pay as little as will possibly be accepted. Here are some suggestions for your negotiating strategy

• Exercise the most extreme politeness, even if you don't trust those you are dealing with.
• Gently but firmly mention the flaws you have found and how much they are apt to cost you to fix
• Let it be known that you are looking at other houses as well as this one.
• Make an offer twice as low as you expect to pay: the seller will surely not accept your offer, but will make a counter offer.
• Ask the owner to include certain repairs as part of the deal.
• Ask the owner to include in the deal certain items, such as
  • Furniture
  • Tools
  • Appliances
  • Restoration Materials
• Ask the owner to pay your closing costs or give you the time remaining on the insurance policy to reduce your start up costs.
• Explore the idea of the seller's giving you a second mortgage at a lower rate than the bank is giving you the first mortgage; if the seller is planning on investing the profit from the sale, the interest you are willing to pay him or her may be more than bank or other investment interest will yield.

Watch out for sharpies who just want to make a lot of money on a house that is worth a little.
To get you through the legal technicalities, hire a real estate lawyer at an hourly rate. You may find you actually save legal costs incurred in broker-handled closings. Make sure your lawyer protects your interests adequately.

This Tip was excerpted from:
Reviving Old Houses by Alan Dan Orme, Garden Way Publishing, 1989.

ISBN# 0-88266-563-4

You will probably meet the owners on one of your visits. As all of you stand around feeling awkward, watch carefully for non-verbal communication among homeowning family members. Did Daughter blush when Dad say the tap water was fit to drink? The owners may offer coffee or a soda, but watch out if you're offered alcoholic beverages. They could be trying to blunt your powers of observation and resolve. Beer, wine and sherry, of course, do not count as alcoholic beverages.

Be as charming as you can when you meet the owners. Remember, your goal is to make them divulge the worst secrets of the house and then let you have it for a fraction of what it's worth just because they like you so much. Failing this, you want to undermine their confidence in he value of their home. Do this by pointing out obscure problems in the form of compliments.

Example: "I love the way you've handled the space in the living room. It makes the room look so much bigger than it really is."

Caveat: Never suggest that anything is wrong with the taste of the owners, even if there are acrylic fur seat covers on all the toilets and a portrait of Elvis over the hearth with eyes that follow you around the room.

This Tip was excerpted from:

The House Trap, by Alfred Gingold, Workman Publishing, 1988.

ISBN# 0-89480-615-7

An appraisal is the value placed on a property by a certified appraiser. When a lender is involved in a purchase they require an appraisal on the property as an integral part of loan underwriting. The sales comparison approach is the most utilized in residential purchases. Generally speaking, the appraised value of the property suggests a fair purchase at that amount.

On the other hand, a tax assessment on a property is usually not a good indicator of the fair market value of the property. It may help you to compare the relative value of properties next to each other or on the same street but the only certain conclusion you can draw is what your taxes will be on the property; not how much you should pay to purchase that property.

Whether you’re looking at an appraisal or a tax assessment, usually the more recent the report, the more accurate it is. Remember, assessment has only to do with the taxes and appraisal has to do with the comparative market value of the property. A property is demonstrated to be worth what a ready, willing, and able buyer will pay without being under duress.

NOTE: A previous tip on this page on this same topic was published erroneously without authorization of the author, Nena Groskind. It has been removed at the request of the author and no endorsement by her of our business or services should be implied.

Depending on the economy, you may find yourself in a buyer's market in which the buyers get the best deals, or you may find yourself in a seller's market in which the sellers get the upper hand. Sometimes, you'll find yourself somewhere in between.

In a buyer's market, there are a lot of homes on the market, and they may take a while to sell. To sell a house, the seller might need to offer a really good price, plus additional incentives such as help with financing. If you're buying a home in this type of market, you can take your time looking and can usually strike a pretty good deal.

In a seller's market, houses aren't on the market for long. In fact, they may sell before they are even listed. Because the market is so strong, many owners will decide to sell their homes themselves; you'll see a lot of for-sale-by-owner homes. If you're selling a house in this market, you're lucky. You'll probably get many good offers and not need to offer any additional incentives. If you're buying a house in this market, you may have to work hard to find a house that you like and can make an offer on before it is sold...To get your offer accepted, you should be financially ready (prequalified). Also, don't expect to submit and have accepted a contract with a lot of contingencies.

This Tip was excerpted from:

The Complete Idiot's Guide to Buying and Selling A Home, by Shelley O'Hara, Alpha Books, 1996.

ISBN# 1-56761-510-4

Price. Some people love the idea of condo ownership, and others hate it. Some who are not at all that thrilled with the idea may opt for it for one simple reason - in many places it's alot cheaper than a single-family detached home. This will be a difficult fact for you to accept if the only condos you are familiar with are developments with names like Country Club Haven and Rockerfeller Manor and have Jags and BMWs parked in front of them. Statistically, however, it's true. In some markets the average sales price of a condo will be 40 to 50 percent less than the single-family detached option.

Variety. Remember that the word condominium describes a form of ownership, not a type of building. Although the apartment-style condo is common, there are an infinite varity. They range from a very modest apartment building that has been converted to lavish single-level units built specifically as condos and clustered around a golf course.

Quality of Construction. Several years ago, as the condo concept became more accepted by homebuyers, a conversion feeding frenzy occurred. Let's say you owned an apartment building that with intensive management was barely returning a positive cash flow for you. An astute developer shows you how to convert the apartments to condos and sell them. The profit figures he projects take yout breath away. You're convinced and you convert. So did a lot of other apartment house owners.

Consumer abuses occurred buring the period, prompting many state legislatures to enact very restrictive rules on condo conversions. One of the biggest complaints had to do with quality of construction. "Paper-thin walls" was a complaint often heard. A tenant who pays $700 a month for an apartment might be slightly annoyed by the presence of a noisy neighbor. A purchaser who pays $100,000 for that apartment as a condo would likely be more than somewhat irritated by that same inconsiderate neighbor.

New construction, built specifically as condos, naturally gets much better marks. For example, when we moved to our present location, a local builder was just in the early stages of constructing a condominium project. We purchased a condo for a relative when it was in the foundation stage. Each individual unit had its own interior walls, seporated by an airspace as opposed to a common wall. It was clear in all the planning and actual construction that these units were designed as homes, not as apartments. Since it was early in the construction process, my wife and mother-in-law could work with the builder to customize the condo. It turned out well for us, and the builder maintains that the nervous twitch he developed had nothing to do with the experience.

Condominium Owners' Association This is an association of elected condo owners who control and manage the overall affairs of the condo complex, including maintenance of the common areas, such as the required periodic painting of the exterior as well as such exotic functions as garbage pickup. Those things obviously cost money, and they seem to cost more money each year. You will be required to pay monthly dues to cover these expenses. By the way, if you buy a condo, the amount of these fees will be considered by the lender when qualifying you for the loan. Condo associations have some rather formidable power. For example, miss one of those dues payments and they can put you a lien on your property - and in a worst-case situation, actually foreclose on it.

This Tip was excerpted from:

The Homebuyer's Survival Guide, by Kenneth W. Edwards, Real Estate Education Company, 1994.

ISBN# 0-7931-0906-X

Dear Edith: After looking at a house a second time, I told my agent I would like to make an offer on it the next day. That evening my agent said the listing agent had told her that there was another "very good" offer being prepared. My agent suggested I write a contract immediately before the other one could be presented.

Insted of trying to offer the price and terms I wanted, I was convinced that in order to have my offer accepted, I should offer $500 over the asking price. This was accepted by the sellers.
What are the chances that either agent duped me? - E.K.N.

Slim.
It really is sometimes advisable to make an offer for more than the asking price, particulary when property is newly listed at a no-nonsense figure.

Of course I can't know whether any particular person is honest, but consider this: by the time the commission was divided among listing office, listing agent, selling office and selling agent, "your" agent probably stood to make about $7 if you paid $500 more. Hardly seems worth lying about.

Neither one was your agent, by the way, unless you had specifically hired a buyer's broker. Both were working for the seller. Both agents had special legal obligations to the seller, including obtaining the best price for the house. They were also, however, required by law to deal honestly with buyers.

This Tip was excerpted from:

Dear Edith...On Real Estate, by Edith Lank, Longman Financial Services Publishing, 1990.

ISBN# 0-7931-0007-0

FHA insurance, paid for by the borrower (mortgagor), protects the lending institution against loss if the property is seized for nonpayment and can't be sold for enough to cover the debt and legal costs. Even though the lender would be reimbursed, the borrower is still personally responsible for any shortfall.

Because the last owner is the one who had financial difficulty, the original borrower could be the one required to make up the loss. It is wise, therefore, to check the financial health of the buyer who proposes to take over one's FHA loan along with the house.

The original borrower is always personally responsible unless a "formal assumption" process is used, under which the new borrower proves satisfactory credit and income to the lending institution.

Even with nonformal assumption, most FHA mortgages place after December 1, 1986, require anyone assuming the loan to prove financial ability to the lender's satisfaction. For many of those loans, the original borrower will be released from liability five years after an assumption.

This Tip was excerpted from:

Dear Edith...On Real Estate by Edith Lank, Longman Financial Services Publishing, 1990

ISBN # 0-7931-0007-0

For the most part, lenders' application fees are reasonable. But some lenders have been getting creative with fees, warned attorney Howard Newman. Some lenders will entice borrowers with a low application fee. They later make up for this by charging "junk fees" that show up somewhere else as part of the closing costs.

Closing costs are fees and charges tacked ontot he mortgage over and beyond the interest rate being quoted. They usually run between 6 and 8 percent of the mortgage amount being borrowed. Closing costs include attorney fees, title insurance and points. One point is equal to 1 percent of the mortgage amount borrowed and must be paid upfront at the closing. Only with FHA loans (explained in Chapter 8) can points be financed along with the rest of the mortgage. A complete list of closing costs is detailed in Chapter 15.

Junk fees came about because of the cut-throat competition created by the huge number of lenders competing for mortgage business around the country, Paulk Havemann explained. Consumers care mostly about the rates and points and, when shopping around, that's what people compare, he said. A low application fee might be quoted and what was once part of the fee thrown into closing cost fees. (When business is slow, however, lenders seem to eliminate a number of these junk fees and closing costs to make their loans more attractive and competitive. A number of states have also been cracking down on what fees are called and what can be charged upfront.)

A favorite fee of Havemann's is the "document preparation fee." This fee can cost as much as several hundred dollars, he said, and is for nothing more than a secretary typing up the loan's paperwork.

Donald Henig, past president of the National Association of Mortgage Brokers, has seen lenders charge $25 for a flood certification, where an independent agency checks to see if a property is in a flood zone. The cost of the lender for this is roughly half that amount.

This Tip was excerpted from:

J. K. Lasser's Guide to Buying Your First Home, by Joe Catalano, J. K. Lasser Institute, a division of Simon & Schuster, Inc., 1993

ISBN# 0-671-88066-7

Lesson: Keep your love to yourself. Put your options on the table.

In his best-selling book You Can Get Anything You Want , Roger Dawson, the world-renowned negotiating expert, tells how a negotiation slipup cost him $30,000 when he was buying his family's present home. Roger writes that one day whi le teaching his daughter to drive in the secluded hills of Southern California, he spied the house of his dreams. Everything about the house was perfect, he says, and it was for sale.

Posing as a reluctant, if not altogether indifferent, buyer, Roger relates how he plotted his negotiation strategy - only to see it evaporate when his wife and daughter returned to look at the house without him. They oohed and aahed over very feature, and by the time they were through with their tour, they had demolished my reluctant buyers plan, says Roger.

It also didn't help matters when his wife told the sellers Roger really thought their house was wonderful. At that point the sellers knew the Dawsons were hooked. With a ticket price of $15, Roger says many people think a tour of Hear st Castle at San Simeon is expensive. But he calculated that one house tour by his wife and daughter cost him $30,000.00.

When talking with sellers, you've got to walk a fine line. Yes, you want to show interest, develop a cooperative, problem-solving attitude, and prevent critical remarks that may offend. Yet you can't go overboard with lavish praise. Nor do you want to tell yourself This is the perfect house, we've simply got to have it.

In other words, don't shut out other options - either in your own mind or in the eyes of the sellers. When the sellers believe you've eliminated other houses from consideration, they'll naturally use that information to bolster their own po sition. Should you tell yourself Nothing else will do, you abandon the strongest negotiating power any buyer has - the willpower to walk away from the deal. Sometimes emotions do get the better of us. But keep in mind that once you relinquish your walk away willpower, you might as well hand the sellers a blank contract and let them fill in the numbers.

This Tip was excerpted from:

The 106 Common Mistakes Homebuyers Make, by Gary Eldred, Ph.D., John Wiley Sons, Inc., 1994.

ISBN# 0-471-31191-X

As with everything else, there are good points and bad points. Bad points are the ones you pay; good points are the ones someone else pays. They are charged by lending institutions as extra upfront, one-time lump-sum interest, when a new loan is placed.

Each point is 1 percent of a new loan being placed. If you buy a house for $150,000 and borrow $120,000, one point would equal $1,200 (not $1,500). Two points would be $2,400. The term is sometimes used interchangeably with per cent, as in You'll have a two-point cap, which means that you'd have a 2-percent cap.

Points are usually paid at final settlement when the loan is actually made or, occasionally, at the time of mortgage application (in which case, find out whether they are refundable if the loan does not go through).

Sometimes you can pay extra points in return for special favors - a lock-in guarantees that you'll receive the rate in effect when you apply for the loan, no matter what has happened to rates in the meantime (but what if rates go down before your closing?) Or you may be charged extra for an extension if you don't close within a given period after the bank commits to making the loan.

When rates are fluctuating rapidly, some borrowers have been known to make mortgage application at two different lenders: one with rate locked in, and one without. For whichever loan isn't eventually chosen, the wheeler-dealer will forfeit an application fee, usually several hundred dollars to cover at least an appraisal and credit report. If wide-spread, the practice would pose a great nuisance to lenders, but it could give the applicant a chance to choose the more favorable loan at the last minute.

Points may be paid by either buyer or seller, depending on their agreement. Points paid by you as the buyer of your own residence are income tax deductible as interest, in the year they are paid. Points you pay to purchase income pro perty must be amortized (deducted bit by bit over the years) along with the other costs of placing an investor's loan.

Points paid by the seller are one of the expenses of selling, and reduce the seller's capital gain on the sale. The buyer, however, is allowed to take points paid by either party as an income tax deduction for interest expense for that year.

This Tipwas excerpted from:

The Home Buyer's Kit, Third Edition , by Edith Lank, Dearborn Financial Publishing , Inc., 1994.

ISBN# 0-7931-1114-5