Charlottesville VA Real Estate Agents: Why Not Buy Your Home at List Price?

Whether you are shopping for Charlottesville VA real estate or looking for a Charlottesville VA real estate agent, you might want to consider working with a real estate agent who thinks outside the box. In a recent interview with one of Charlottesvilles more prominent real estate agents, the interviewer is surprised to learn that there are several good reasons to buy a home at list price. The agent, one of hundreds of real estate agents serving the Charlottesville / Albemarle, Virginia area, also serves the communities of Keswick and Crozet.

Charlottesville, VA November 17, 2004 - If you think you pretty much know everything there is to know about residential real estate, you might reconsider that notion given the opportunity to talk with http://www.wahoorealestate.com [Steve Taylor], a seasoned veteran of the Charlottesville real estate industry. A bit of a contrarian, these days he talks less about the price of housing than he does concessions and that really sets him apart from most agents serving the Charlottesville area.

Like most real estate agents and brokers, Steve used to think that his primary responsibility as a buyer's agent was to negotiate the lowest possible price but it dawned on him that this focus may do prospective home buyers and the surrounding homeowners a disservice.

"What a lot of home buyers do not take into consideration is the effect lower prices have on neighborhood property values," he said.

It is a well known fact that the sales price of a home becomes a matter of public record and, as such, will be used by appraisers to justify the value of future neighborhood sales. "Homes sold below market obviously have a negative impact on property values," he said.

To illustrate the point, Steve pulls out a post it note. "Let's assume we are dealing with a home that is listed for $500,000, and it is sells for $485,000," he said writing the figures in a deliberate, scripted hand.

"Now I used to think that in negotiating the lower price I had done a good job, because my buyer got a deal. But the fact is that the buyers in buying the house for $485,000 didn't get $15,000 of instant equity, they just negotiated a deal that effectively brought neighborhood property values down," he said putting considerable emphasis on 'down'.

Sitting up he went on to explain. "The recorded sales price of $485,000 will be subsequently used to justify the price of the next home that comes on the market," he said, "and it's obvious that the lower purchase price will have an overall negative impact on existing property values and future sales."

The alternative, according to Steve, is a simple matter of restructuring the purchase agreement. "If the same home is sold at $500,000, but the purchase agreement includes $15,000 worth of concessions to cover closing costs and/or repairs, the buyer essentially gets the home at the same discounted price but the county records will show the full purchase price."

Leaning forward to draw a double line beneath the listing price, Steve continued. "In the end the sellers realize the same net gain they would have had had they sold at $485,000; the buyers eliminate the need to come out of pocket to cover costing costs and repairs, thereby, leveraging their cash reserves; and, lastly, the value of properties in the neighborhood are sustained."

Sitting back in his chair again Steve brought the lesson to a conclusion. "Now when the lender's appraiser goes out to find comparable sales to justify the sale of the next home in the neighborhood, he will be seeing a sales price of $500,000, not $485,000 so it will be much easier for him to justify a higher sales price."

Regarding the home buyers' ability to leverage their sometimes limited resources, Steve points out that this strategy offers three distinct advantages. "Buyers can choose to keep more money in their bank account, use the additional funds to increase their down payment and, thereby, reduce monthly mortgage payment, or they can use those funds to purchase a slightly more expensive home," he said.

Allowable concessions take many forms. "There are always those pesky closing costs," he said. "Recurring and non-recurring costs on a $500,000 purchase can run anywhere between $5,000 and $10,000 and that's a lot of money to come out of pocket with, especially if you are having a short term cash flow problem," he said.

Concessions can also be applied to repairs and/or upgrades. "An older home may need new carpeting, a new heating and air conditioning system, a paint job, a home warranty, or perhaps a new roof," he said.

In the end Steve doesn't push anyone to accept this line of thinking, but he obviously believes it's a negotiating strategy that is well worth consideration especially if, as a home buyer, you find yourself needing to leverage your cash position. You never know when the extra cash will come in handy.

If you would like to contact Steve, you can call him toll free at (800) 257-8329 Ext. 6055, or directly at (434) 817-6055, visit http://www.wahoorealestate.com [WahooRealEstate.com], or send him an email via the hyperlink shown in the column to the right of this article.

Ron Scott, the author, is a free lance writer whose diverse interests include his favorite hamburger recipe, an American success story, and ayurvedic herbal remedies.

# # #