Plot strategies carefully to buy overpriced house

THE BALTIMORE SUN

The Carney townhouse featured designer draperies, marble kitchen tile, brick patios off the back and fancy landscaped gardens. The property, owned by a wallpaper wholesaler, was exceptional in many ways -- including its price tag.

Priced 10 percent higher than other homes in its Satyr Woods community, the property was spurned by buyers for several weeks -- until it caught the fancy of a divorced mother of a teen-age son.

Pleased at both the home's style of decoration and the fact that it was in move-in condition, the divorced mother -- a busy nurse who worked at nearby hospitals -- soon coveted the place. But given its high price, she was stumped. How could she bring the seller down to reality on price?

Should the buyer dump the to-die-for property simply because it's overpriced? Certainly not, real estate experts say. There are several ways for a buyer to nudge a seller into line with prevailing prices, realty specialists insist.

"It takes a little finesse. But it can be done," says Monte Helme,a Century 21 vice president.

In this sober real estate era, better than 90 percent of sellers have reckoned with the fact that they cannot price their homes as high as they might have several years ago before the United States headed into an economic downturn. But a minority -- such as the wallpaper wholesaler -- hold out for a price that's way over market.

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There are many reasons why sellers cling to a fictional price, realty experts say. Here are four of them:

* Reason No. 1: Some sellers bought at a price higher than the current market.

"They probably bought in the mid- to late 1980s when prices were

booming and -- it's basic human nature -- they really don't want to take a loss. Part of it is ego," says Mr. Helme, the Century 21 executive.

* Reason No. 2: Some sellers can't afford to sell at the market price.

The widespread use of home equity loans in recent years has meant that many sellers have tapped the equity in their homes -- whether for a new car, a vacation, an offspring's education or to pay off credit card debts.

Borrowing via a home equity loan makes sense from a tax perspective, since mortgage interest remains deductible while other consumer loan interest is not. Still, a home equity loan must be paid off when the home that secures such a mortgage is sold. Realizing they've used up their equity, some home sellers seek to make up for that by trying to get a higher price.

* Reason No. 3: Some sellers continue to demand a hefty premium for a well-set house.

In the boom years, a house with a special advantage -- such as a great view, location near a golf course or a body of water or a wooded area -- used to command a 30 percent to 40 percent premium over like properties without the same advantage.

But today's sober buyers simply won't pay the high premiums of the past and are only willing to pay 10 percent to 20 percent more for a well-set house, Mr. Helme says. Unfortunately for buyers, some sellers have yet to confront this reality.

* Reason No. 4: Some sellers insist on getting every penny out of an over-improved house.

A homeowner who adds on an expensive addition, installs gold faucets in his bathrooms or replaces carpet with marble tile can't expect to get every penny of his investment back when he sells. But that message is slow to get through to many home sellers.

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If you covet an overpriced property but don't want to pay far more than fair market value, realty specialists suggest these TC strategies:

* Offer less than the asking price, but attach "comparables" to your offer.

A buyer who makes a low-ball offer on a property stands the risk of alienating the seller, who may take it as a personal affront. But a low offer that is accompanied by supporting material -- figures on recent sales for like properties in the same neighborhood -- could seem more businesslike and less threatening, says Brian Hannon, an agent for the Roland Park office of Prudential Preferred Properties.

"Using comparables gives you some ammunition," Mr. Hannon says.

* Hire an appraiser as an arbitrator on price.

One way to establish the home's value is to bring in an independent appraiser -- perhaps one selected by the seller from a list of names provided by the prospective buyer, suggests Gregg Pluemer, an agent with Coldwell Banker's Charles Street office in the Towson area.

It's one thing for a buyer to assert that a property is overpriced. It's quite another for a neutral third party to do so, according to Mr. Pluemer. Obtaining an appraisal can be an inexpensive yet effective way to bring a seller down to reality, he says.

* Tailor your offer to the seller's needs.

A house deal is more than simply a dollar figure written down on paper. Sellers also care about the terms and conditions of an offer -- whether the deal is contingent on the sale of a buyer's home, who will bear the closing costs and when the deal would close.

"Finding out what the seller's hot buttons are is part of the psychology of buying," says Mr. Helme, the Century 21 executive.

It's a good negotiating strategy to meet the seller's terms in conjunction with an offer that also cuts down his price, Mr. Helme contends. In addition, you can make yourself more attractive to the seller if you demonstrate your ability to carry the mortgage payments on his place by becoming prequalified through a mortgage lender.

"Most buyers don't go to the trouble of becoming prequalified," Mr. Helme notes.

* Let the seller stew for a while.

"Sometimes time will work to your advantage," says Mr. Pluemer, the Towson agent.

The passage of time -- and the urgency that builds as the weeks go by -- is enough to convince most sellers that they've priced their properties too high. Although you always run the risk of having another buyer come in and purchase the house out from under you, the chance is slim as long as the property is overpriced.

TH "Eventually, every house sells for what it's worth. It's really just

that simple," says Mr. Hannon, the Roland Park agent.

* Compromise with the seller on price.

Is the home you've selected extraordinary in the sense of offering extra upgrades and improvements? Is it already

decorated to your taste, meaning you'd have very little to change after you've moved in there? Then maybe the property is worth more to you than would be a plain vanilla house in the same category, says Mr. Hannon, who had the listing on the Carney townhouse owned by the wallpaper wholesaler.

In the end, the nurse who bought the townhouse wound up paying $7,000 more than like properties -- without the upgrades -- fetched in the Carney market, Mr. Hannon recalls. Even so, she reasoned that she would still get a good deal -- since the upgrades would have cost her even more than the premium she paid on the property.

The only problem with paying more than comparable properties is that the appraiser working for the buyer's mortgage lender may not agree that the property is worth what the buyer is willing to pay. This can force both buyer and seller back to the negotiating table, causing some deals to fall through.

But even if the house "under-appraises," as the Carney townhouse did, the deal can usually be salvaged if the buyer is willing to kick in a few thousand extra dollars in cash.

"Look for the happy medium -- the meeting point at which both buyer and seller can be happy with the deal," Mr. Hannon recommends.

(Ellen James Martin is a columnist for The Sun.)

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