Vacant homes can be a deal for buyers
For several years, homebuyers in popular neighborhoods have been plagued with the problem of tight inventories. Especially in starter-home communities, there have been more buyers than sellers. The result: multiple-bid drama.
Finally, that situation is gradually easing, says Daryl Fairweather, chief economist of Redfin, a national real estate brokerage.
At long last, the inventory crunch is starting to subside. In coveted areas, prices are still ascending, but at a slower rate.
These market changes are beginning to give buyers a breather, helping offset the rise in mortgage rates and making the home search process feel less frantic.
Experienced real estate pros say sellers are slower than buyers to catch on to market changes. Given human nature, some owners are still trying to “test the market” with high list prices, which can cause a house to get stigmatized and then to languish unsold for an extended period.
This can create buying opportunities for attentive purchasers, says Dorcas Helfant, co-owner of several realty firms. These opportunities occur when the owners of an overpriced home are compelled to move away with the place still unsold, leaving it vacant.
Helfant, a past president of the National Association of Realtors, says that after a property has gone vacant, the owners typically become much more motivated to negotiate because they face substantial carrying costs.
With current market conditions gradually easing for buyers, Helfant says it’s possible to get a good deal on a vacant property. But, as always, she urges buyers to exercise caution, especially if the property being considered is vacant due to foreclosure.
Here are a few pointers for buyers: moved away. It’s still harder if the empty property has gone back to the bank through foreclosure.
“The bank won’t tell you anything. And, frankly, the folks at the bank — or the real estate agent they’ve hired — probably won’t know much about the people who lived there,” says Merrill Ottwein, a former president of the National Association of Exclusive Buyer Agents
To get the scoop on a vacant property that interests you, your best sources are often neighbors.
“Those living nearby probably know something about the skeletons in the closet,” Ottwein says.
Perhaps the vacant property you like has gone unsold for so long that you’re nervous about hidden defects. In fact, you don’t even want to make an offer until you know more. In such cases, — Merrill Ottwein, ex-president of the National Association of Exclusive Buyer Agents Ottwein advises hiring a home inspector to take a preliminary look.
“If you decide to go through with the purchase, a pre-inspection will let you set your bid based on findings from the inspection. Then, if you decide to back out of the deal, you can walk away without complications,” Ottwein says.
Cost-conscious banks that own foreclosed property sometimes shut off utility service to the vacant homes they own.
But a lack of utility service poses a challenge to home inspectors.
“In fact, it’s useless to do an inspection when the utilities are off. You can’t tell if the cooling, heating and plumbing are functioning correctly,” Helfant says.
She strongly recommends you always have a home inspection on a vacant property — if not before a bid is submitted, then after. And even if you have to pay to get utility service restored, she says it’s worth the expense.
“It shouldn’t be too costly to get the utilities restored for just a five-day period or so,” she says.
“Before you write your offer, you and your agent should take a careful look at the recent sales history in your neighborhood. As always, you have to be careful to avoid overpaying,” Ottwein says.
Ideally, you’ll want to examine at least three similar properties that have sold in the immediate area in the past three to six months, adjusting for differences such as a larger garage or a second fireplace.
Although you’ll want to take a home’s condition into account when judging its market value, Ottwein advises against seeking out-of-proportion discounts to compensate for superficial shortcomings.
Also, don’t get greedy and demand too many small concessions.
“The market might be slightly better for buyers now. But that doesn’t mean you can take the owners to the cleaners. Forget about small issues like the neon yellow kitchen walls you want repainted or replacing that cheap light fixture in the dining room. Focus on the big picture,” he says.