Sellers Up The Ante For Home Buying
In many markets today, sellers have the advantage. That’s because housing inventory remains low and there’s a pent-up demand from more shoppers. As a result, buying a home can be a bit more challenging for purchasers in the current real estate climate.
That doesn’t mean buyers have no power in the process or little hope of landing the home of their dreams. Having a good down payment saved, getting pre-approved for a mortgage loan, and being prepared to make wise and quick decisions can improve your chances.
It’s also helpful to understand the current power dynamics at work between sellers and buyers. New data suggest that buyers should have more confidence in their abilities to negotiate a favorable deal.Verify your new rate (Dec 1st, 2020)
What The Research Found
A new report from Redfin indicates that seller confidence is rising, as determined by answers from sellers polled this spring. Twenty percent of sellers said they had “all the power” over buyers, up from about 13.1 percent tallied in a poll taken three months earlier.
Only 13.5 percent felt buyers had a “little more power” than sellers, down from 22.5 percent.
But looking closer at the numbers, perhaps a different conclusion can be drawn. Buyers can take heart that not as many sellers are as overconfident or dominant-feeling as one might suspect.
In fact, a total of about 60 percent said sellers have a little more or all the power. Yet nearly 40 percent said buyers have either equal or more power than sellers.
A 60-40 ratio doesn’t sound like the overwhelming advantage for sellers that many would have you believe is gospel truth.
Decoding The Data When Buying A Home
Make no mistake, says Rachel Musiker, spokesperson for Seattle-based Redfin: all the leading indicators suggest that this truly is a market that favors sellers.
“I think sellers really do have the power in this market,” she says. “They are the ones holding the inventory, and there’s really strong demand from buyers. That gives sellers more leverage.”
What’s more, Musiker notes, seller confidence is increasing lately.
“They had been holding out in previous months and a little slower to list their homes. But in the past few weeks, we’ve been hearing from agents that more sellers are now taking the plunge and listing their homes,” she says.
That doesn’t mean buyers don’t hold any winning cards or are at the complete mercy of sellers and the whims of real estate fate.
“I think there’s a lot buyers can do to work with sellers to come to mutually agreeable terms—beyond just escalating your price to win a home,” says Musiker. “First, remember that a lot of sellers will also need a next home to buy. That right there can change the power dynamics.”
Indeed, many sellers who list are in limbo as to where they will go next and when. Or they desire a flexible closing and moving schedule that will make it easier for them to transition to their next home after they sell. And therein lies an opportunity for buyers.
“Buyers can agree to a lease-back agreement whereby the buyers will rent the home back to the seller for a period of time at low or no cost. They can also agree to a closing date that accommodates sellers,” she adds. “The point is, being flexible can help your cause.”
Another option when buying a home is to consider waiving your home inspection contingency.
“Instead, you can have a pre-inspection or mini-inspection done before you submit your offer. That can give the seller more confidence that the deal is not going to fall apart,” says Musiker.
Agreeing to pay cash to make up any difference between the sales price and the appraisal price may give you a leg up over rival bidders, too, she says.
“Also, we’ve seen buyers agree to nonrefundable deposits of, for example, $3,000 in lieu of waiving their contingencies. This reassures the seller that, even if the buyer walks away, the seller can keep that money,” Musiker explains.
It gives the seller more confidence that the buyer is really committed to the home, as well. “It shows that they’ll do whatever it takes to not let the deal fall apart,” she says.
Inquiring Minds Want To Know
When buying a home, you can proactively probe to better meet the seller’s wishes. This requires using your agent to ask questions.
“Don’t be afraid to find out more precisely what the seller wants and needs,” says Musiker. “Often, buyers worry about bothering the seller or their listing agent with questions, the answers to which can help them make a better offer. Ask when they’d prefer to move out, for example.”
The bottom line, she adds, is to explore creative ways to get ahead in this market. That means waiting to use your trump cards—raising your offer or threatening to walk away from the deal—as a last resort.
The good news is that higher seller confidence means more are eager to list their homes. And more inventory coming to the market could relieve pressure from increased buyer demand.
The not-so-good news is that Musiker still doesn’t expect market conditions to favor buyers anytime soon.
“There needs to be more inventory added and more new construction built. And more sellers need to list their homes. I think we are still a few years away from those things happening,” she says.
Meanwhile, don’t let current real estate power dynamics dissuade you.
“Buyers should continue to pursue their dreams and not give up,” adds Musiker. “Today’s buyers need to be savvy and educated about the market. Know your limits, be prepared to walk away from a bad deal, and remember that sellers don’t hold all the cards.”
What Are Today’s Mortgage Rates?
Today’s mortgage rates are very affordable, thanks to current economic conditions and global politics. Check with several loan companies to find your best mortgage rate, and get pre-approved before house hunting. That will help you get the best deal on your next home.Verify your new rate (Dec 1st, 2020)