Home Prices are High
These days, most homeowners trying to sell a home have the upper hand—a seller’s market means home prices are high, inventory is low, and sellers can afford to be choosy with offers.
But what happens when that changes? Places like Boston that were paralyzed for weeks by a brutal winter, are already bucking the trend and moving toward a buyer’s market, when potential home buyers hope to leverage their bargaining power.
When the number of homes on the market outnumbers the number of buyers, sellers may be more willing to negotiate on the price of their home and offer concessions to close a deal. But potential buyers are wrong to assume they’ll be able to find bargain-basement prices.
Follow these five tips to make sure you don’t make mistakes trying to take advantage of a buyer’s market.
Know the market
Gary Lucido, president of Lucid Realty in Chicago, says it’s important to understand what the market you’re looking in is offering.
“When everything is overpriced, you are underpricing everything,” he says. If you think everything is over priced, it’s time to move on to another neighborhood. Trying to make offers substantially below market value is usually a waste of time.
If you’re looking for the best deal, do your homework and look for a place that’s been on the market for a long time. “The longer a house or apartment is on the market the more favorable or open the seller will be to making a deal,” says Rebecca Knaster of William Raveis in New York City.
2. Lowball the right way
It’s common for buyers to pitch a lowball offer in a buyer’s market—in fact, it can be a good strategy. But keep your expectations realistic. Lucido remembers an instance in which a buyer wanted to offer $500,000 less for a mansion in Oak Brook, IL, listed at $2 million.
“[He] got mad when I told him it would sell much higher than that,” Lucido said. “He felt like the right Realtor® could get the seller to accept a below-market offer. It sold within days for $1.9 million.” Check to see what houses have sold for in the area, and pay attention to the appraiser’s assessment of the property.
3. Know when to ask for upgrades and discounts
In a buyer’s market, you’ll have more leverage to ask for things you want. But don’t ask the seller to make the repairs, or deduct those repairs from the asking price to shape your offer?
Lucido says to keep it simple.
“Take the property as is and discount all the issues you have,” he said. “The seller just wants to walk away from the property and if you start complicating it, you may end paying more than you would if you just addressed those issues yourself.” “Plus, if the seller fixes it, you may not like the way they fix it,” he added. Keep in mind this strategy won’t work for some loans such as FHA, which can have stricter qualifying requirements than other loans. If that’s the case, the repairs need to be made before the loan can be approved.
4. Show you’re serious
When you’re factoring the price of repairs into the cost of the home, don’t talk in generalities.
“Be specific. This helps everyone understand you are serious and not just floating guesses,” says Glenn Phillips, CEO of the multistate brokerage Lake Homes Realty.
Discuss with your Realtor or builder how much certain projects will cost and use those numbers. If you can provide a quote, that’s even better.
5. Talk closing costs
Mortgage closing costs typically amount to about 1% to 2% of the sale price. But in a buyer’s market, you might be able to get those costs reduced. You can ask your lender to reduce costs that seem too expensive and you can ask the seller to pay for a portion or all of those closing costs. For example, if there’s a flip tax for co-ops in New York City, you could ask the seller to pay for it, Knaster says.
Bottom line: Don’t be afraid to negotiate. And don’t be afraid to walk away from the deal.
If you are in the market for a new house and would like information on homes for sale, or are first time home buyer not working with a Realtor and would like to schedule a consultation with a qualified Oakland County and Macomb County Realtor, please complete the Lang Premier Properties contact form to have a real estate agent contact you. Lang Premier Properties are Clawson Realtors specializing in Oakland County Real Estate. Stephanie is an agent with Lang Premier Properties. See what past clients have to say about Stephanie Lang. Lang Premier Properties looks out for your best interests when you purchase a new custom luxury home. We always recommend working with an experienced luxury real estate agent when buying new luxury estate.