How to NOT overpay when buying a home
The best way to NOT overpay when buying a home in the Charleston real estate market is to use a buyers agent and hopefully that agent will be me. Now, that might sound a bit self serving but if you hang in here long enough to hear this story, you'll save money when buying a Charleston home for sale.
I noticed an ad recently by a local agent designed to appeal to homeowners considering selling their homes. The real estate agent touted a recent sale of a home at full price. OK, I'm curious to find out what home in today's Charleston real estate market sold at full price so I looked it up on the Charleston MLS.
And what did I discover.
As you can see, it did sell for full price after 2 price reductions and almost 8 months on the market. But a more careful look at the listing showed that the seller was also offering to pay "a portion of the buyers closing costs and prepaids". So let's use the most common offers of either $3000 or 3% which would be approximately $5250 towards buyer closing costs which effectively reduces the real sales price of the home from $175,000 to either $172,000 or $169,750.
In my opinion, a home that has had 2 price reductions and also includes an offer to pay a portion of the buyers closing costs probably isn't a full price sale.
But now for the big surprise. The listing agent was also the selling agent and what does that mean.
It means that the buyers did not seek buyer representation to represent their interests in the transaction and dealt directly with the listing agent either as self represented buyers or in disclosed dual agency (which is legal but not necessarily beneficial to the buyer). Click here for more information on understanding buyer agency.
Either way, they paid too much and here's why.
If I was their agent, I would have negotiated a price below the current list price. I can absolutely guarantee that I would have gotten that home for at least $5000 less than list price and gotten the seller concession of closing costs as well. It doesn't take a rocket scientist to negotiate that kind of price in today's market when a look at the MLS statistics shows that homes are selling on average for 5% below list price. Of course, on average means that some homes are selling for list price, some a little less than list and others much below list. But when I see that the home has been on the market for 6 months and the price reductions have not been large or recent, I absolutely believe that my buyers can purchase the home for less than full price.
Bottom line. How to NOT overpay when buying a home. Use a buyers agent.
See these related posts as well:
Fiduciary is more than a fancy word.
Why you should call the listing agent.