4 Smart Moves for Getting a Great Deal on a House

Know the market, don't expect a windfall, and negotiate with everyone.

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The spring home-buying season has arrived—except things are quite different from years past. While many economists believe house prices still have further to fall, there's little doubt it's become a buyer's market, with buyers gaining leverage that was unthinkable during the boom and the long run-up in prices. For once, qualified buyers have the upper hand not only with sellers but also with real estate agents, mortgage lenders, and even contractors who can bring a house up to snuff.

Here are four tips for turning the housing downturn to your advantage:

Know the market. The best way to snag a great deal on a house is to come armed with a boatload of data showing that you've done your homework and know what the place is worth. Thankfully, information on everything—from what comparable houses have sold for to what exactly has been remodeled, and when—is pretty much at your fingertips, through commercial sites like zillow.com and trulia.com as well as via government databases, such as your local county assessor's, planning department's, and clerk and recorder's websites. Such data are especially useful when making an offer on a foreclosed home that's been repossessed by a bank, where you won't have to deal with touchy issues like a seller's sentimental attachments to his home. "All banks want is to get a fair price and get out," says Pat Lashinsky, chief executive of real estate brokerage ZipRealty, which lists many bank-owned foreclosures on its website. "Don't try to low-ball the bank. But if you come in with all the statistics and can make your case that yours is a fair price, they're more likely to take it."

Negotiate...with everyone. If you're working with a real estate broker, start there. Traditionally, the agent representing the buyer splits the commission—from 4 to 6 percent—with the agent representing the seller. Buyer's agents are fond of telling their clients that their services are "free" because the seller is the one paying the commission. But what seller wouldn't be willing to lower his price by, say, 1 percent, if the agent was willing to lower his commission by an equal amount? The truth is, with serious buyers few and far between these days, agents may be willing to take a commission cut, especially with motivated buyers. Of course, the same goes for everyone from the seller's agent to the contractor you want to add the deck you plan to put out back.

Don't expect "found money." With sellers increasingly desperate and the number of "distress" sales and auctions skyrocketing, there are certainly plenty of deals around. But experts say the number of situations in which you can literally buy a house one day and sell it for more the next are exceedingly rare. "Most sellers that resort to the auction block have already exhausted every other avenue," says real estate broker Ralph Roberts, author of Foreclosure Investing for Dummies. With such houses already picked over by other investors, anyone who buys one—even at a discount—has to see substantial value in the house that others buyers can't. For example, will a well-placed $10,000 in improvements yield twice the value? Or is that new company moving 5,000 people into the area next year likely to increase demand for houses in the neighborhood? The bottom line: While it's always worthwhile to keep your eyes out for that needle-in-a-haystack deal, better to focus your efforts on a house that stands a good chance of building equity over time.

Location, lo...well, you know this one. The old mantra is as true as ever: No matter how inexpensive a property might seem, it's no deal if it's down the street from an oil refinery or in a city suffering from chronic unemployment. While houses near great schools or within a few blocks of public transportation almost always sell at a premium to the overall market, they tend to hold their value in down markets and rise more quickly in good ones. Indeed, while it may seem that it's the house you're investing in, it's actually the land underneath it that appreciates. That's why some of the best deals to be had may be the worst houses on the best blocks, especially in areas where demographic trends remain strong, such as in Washington, D.C., and the San Francisco Bay Area.