Asking Right Questions Can Help Buyer Get the Best Deal

One of my neighbors recently sold her home to move to a less expensive community.

When a buyer made a low purchase offer just three days after the house was put up for sale, the seller accepted, even though the sales price was below comparable sales.

The buyer got a bargain. Sure, the house needs a little fixing up. But the seller had bought the house 20 years ago and had such a large profit, she wasn’t chasing the last dollar.

If the buyer is as smart as I think he is, he checked the price the seller paid, made a low offer and figured the seller would accept because of her large profit. If so, he was right. That’s how to profitably buy a home (or any real estate). Ask the key questions.

Here are the 10 questions home buyers should ask (but sellers and realty agents hope you won’t) to avoid making a serious mistake:

* Why is the seller selling?

This is the key question every home buyer should ask. But few do. The two prime reasons for asking are (a) buyers are curious, and (b) buyers are looking for an anxious seller who will accept a rock-bottom offer.

However, don’t always expect a truthful answer. The seller often hasn’t told the listing agent the real reason for selling. Many agents don’t even ask.

Prime reasons for home selling include job location change, moving to a larger (or smaller) home, a death or birth in the family, retirement and health.

Since the 1997 Tax Act took effect, a new seller motivation is tax-free profits up to $250,000 ($500,000 for a married couple filing jointly).

Undisclosed reasons include financial trouble (such as pending foreclosure) and divorce. You won’t always be told the truth, but it won’t hurt to ask.

Some realty agents believe the seller’s reason is none of the buyer’s business. I disagree. If there is a pending foreclosure, for example, a prospective buyer needs to know that so the sale can close before the foreclosure date.

* How much did the seller pay?

Although the answer to this question has nothing to do with today’s market value of the home, buyers should know what the seller paid to gauge if they will have a large profit.

Because my neighbor had a large profit, the buyer correctly guessed she probably didn’t really care if he offered top dollar or not.

If the agent refuses to disclose, or doesn’t know, how much the seller paid, you can probably find out. This is usually public information available by checking public records. By knowing the purchase price, the buyer knows how much room the seller has to negotiate.

* How was the asking price determined?

Smart home buyers know that before making a purchase offer, they should insist that the realty agent prepare a written comparative market analysis.

This form shows recent nearby sales prices of comparable homes, asking prices of neighborhood homes currently listed for sale and information about recently expired nearby listings.

An analysis helps buyers arrive at an intelligent purchase offer. Equally important, such an analysis is usually used by the seller when setting the asking price. However, many sellers set their asking prices too high. A well-researched analysis will clearly show this.

* Do you have a written disclosure of all material facts adversely affecting the desirability of this home?

Most states require home sellers to disclose known defects. In states that don’t, the best realty agents insist that their sellers do so anyway, primarily to prevent lawsuits after the sale.

Be wary if the seller refuses to disclose known defects. Some home sales are “as is,” such as probate and foreclosure sales. “As is” means the seller will not pay for any repairs. Watch out when buying an “as is” home; always hire a professional inspector and accompany that inspector to discover any undisclosed defects.

* Are there any planned neighborhood changes affecting the desirability of this home?

This open-ended question is designed to reveal planned developments, such as a new freeway nearby. It won’t hurt to ask. Professional realty agents are supposed to know about these plans and disclose them to home buyers.

* Are there any neighborhood nuisances or problem neighbors who cause disturbances? How many times have you called the police each year that you’ve lived here?

A visit to the local police station will reveal any adverse crime statistics. But you’re probably more concerned with the noisy neighbor next door or, worse, a nearby child molester. Smart home buyers want to learn about these problems before, not after, buying.

* What problems have you had with this home? How were they corrected?

The California law that sellers and realty agents must disclose current problems, noted above, don’t necessarily apply to problems that have been corrected.

For example, shortly after I bought my home, my new neighbor came over to introduce himself. Then he said, “I presume the sellers told you about the slide problem they had with that hill behind your house.”

He went on to tell me how the hill had slid into the house a few years earlier. Then he said, “But I think those new drains solved the problem.” It was 20 years ago, so I assume the drainage problem was solved.

* What do you like best about this home? What don’t you like about it?

These open-ended questions will get home sellers talking about the pros and cons of their neighborhood. Although realty agents will cringe when you ask such questions (that’s why they try to keep home sellers out of sight), you deserve to know the answers. Find out as much as you can, but remember that no home is perfect.

* Are the local public schools getting better or worse?

Before starting a home search, smart home buyers check the school district statistics to find the best public schools.

Even if you don’t have children, top quality schools are important because good schools help home market values appreciate better than in areas with poor schools.

* If you were buying this home, what would you change about it?

This final question might reveal the potential of the home. Or it could reveal a serious drawback you just can’t tolerate. Either way, it won’t hurt to ask this and any other question you want answered before buying your next home.

Robert J. Bruss is a syndicated columnist, as well as a real estate investor, lawyer, broker and educator in the San Francisco Bay area.