Called the "Queen of Real Estate" and even "Jaws" for her aggressively successful tactics, super broker Dolly Lenz has sold over $8.5 billion dollars in high-end properties, catering to clients like Barbra Streisand, Billy Joel and P. Diddy.
Now she's revealing five tips to buying a million-dollar home.
In A Buyer's Market: Be Aggressive
In a buyer's market, sellers have fewer options. Buyers are scarce and therefore, they have the upper hand in that they are better able to dictate terms.
In this instance, buyers can be aggressive in their bidding and are free to probe how motivated a seller is to sell. In this environment, buyers should consider asking the seller to pick up certain closing costs, include furnishings as part of the deal, and even request seller financing.
In buyer's markets, sellers become very competitive with one another and buyers can use this to their advantage.
Buyers should not be shy about using one seller against another and see which one will offer a better deal. This is especially advantageous in neighborhoods which have similar homes and buyers are indifferent about which property they prefer.
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In a Seller's Market: Be Prepared
In a seller's market, multiple bids on the same property are common as inventory levels are low. Nothing gets a seller's attention more than a buyer who is both ready and able to consummate a deal.
For this reason potential buyers have to be prepared before they start bidding. Obviously, cash is king and those paying cash are in a commanding position to seal the deal with a seller. But for most buyers, financing is a necessary element to a purchase and those bidding with commitment in hand stand a much better chance of attracting a seller's attention than those without.
Demonstrating an ability to act quickly is also desirable to sellers. This obligates a buyer to being responsive to a seller's communications in real time and being prepared with pre-approved financing, a closing attorney and a flexible closing date.
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Most people think that the bidder offering the highest price will get the deal but often that is not the case.
Savvy sellers evaluate all the terms of a deal as a package and price is only one factor. For example, most sellers will find a $1 million offer with a commitment letter for 70 percent financing superior to a higher offer of $1,060,000 with a contingency of 80 percent financing, unless the buyer with the higher offer can demonstrate likelihood that they will obtain the necessary financing.
Beware the Onerous Mortgage Contingency
In negotiating a deal, both buyers and sellers assume risk. Just as you are taking a risk by agreeing to buy, a seller takes on risk by agreeing to sell. Naturally, a seller wants a deal with zero contingencies, to eliminate the likelihood of the buyer backing out, while a buyer wants a deal with as many contingencies as possible, should his circumstances change.
The mortgage contingency is a major contract issue for both buyer and seller and as a buyer you want to obtain terms that are favorable to you. Failure to do this properly could jeopardize your contract deposit. The key element is to establish a maximum amount you are going to finance and the higher the percentage you can get in the contract, the better off you'll be. The seller will try to negotiate a lower percentage but the key is to establish a number that you are comfortable with.
Buying a New Home? Thoroughly Vet the Builder
When buying a new home you need to ensure that the builder has an excellent reputation within the community he operates in. You need to review his track record by interviewing buyers of previously purchased homes to ensure the builder has lived up to his commitments and has earned a reputation for building quality homes.
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It's important to obtain a list of references from the builder and contact as many people on the list as possible. A big builder should provide the names of at least 20 people who have previously bought homes. You should also knock on as many doors as you can and ask homeowners about their experience with the builder.
All 50 states require builders to be licensed and you should inquire about the builder's status with the state licensing authority. You should also obtain a listing of any lawsuits naming the builder as a litigant.
Getting a Mortgage? Lay Low Until The Closing Date
Buyers with bank commitment letters in hand are better able to command a seller's attention than buyers who appear empty handed. But you should know that all commitment letters come with contingencies that need to be satisfied before a bank will allow a closing to occur. So you should do whatever the commitment letter says you need to do and the sooner you do it the better.
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The most ubiquitous contingency a bank requires is proof that your financial condition has not changed since the commitment letter was issued just prior to closing. In order to meet this requirement you should do nothing between the commitment date and the closing date that will negatively impact your financial status, such as switching jobs or taking on new debt.
-By Dolly Lenz, the Vice Chairman of Prudential Douglas Elliman
The million dollar home competition is on CNBC all day Tuesday, April 23 on "Squawk Box," "Squawk on the Street," "Street Signs" and "Closing Bell."