There is a lot of news in the media about the real estate market starting to cool down for sellers and balance out for buyers. If you are a buyer, you may be getting giddy about it. Don't get too excited yet, however. It does not happen overnight. Here are a couple of strategies for buyers to follow in order to secure the houses they have been waiting for.
Offer Market Price
Buyers still need to offer at least market price for a home, perhaps higher. Home values are still going up. They are just not going up at the rate they were at the beginning of the summer. According to an article on forbes.com written by Natalie Campisi, Housing Market Predictions 2022: When Will Prices Drop?, "Home prices have continued to surge despite higher mortgage rates and an increase in housing supply - factors that typically put downward pressure on home prices." The same article cited the surprising statistics, "In June, the national median listing price for single-family homes was $450,000, up 16.9% from the same time last year and more than 31% from June 2020, according to Realtor.com." Markets differ around the country, so ask your experienced, local real estate agent for advice. Have your agent prepare a market analysis for the home you are looking to purchase. Offer a competitive price, but you may not need to offer too much higher than list price.
Consider the Competition
There are still plenty of buyers out there who are your competition. If there is more than one offer on the property, you will be in a multiple offer situation. However, some buyers have dropped out of the market due to increasing mortgage interest rates and inflation. The same article on forbes.com cites, "Mortgage applications dropped to the lowest level at the end of June, making the biggest slump in 22 years. according to Mortgage Bankers Association (MBA)." Before you submit your offer to purchase, have your real estate agent ask if there are any more offers. The seller's agent doesn't have to disclose that information, but they may. Write your offer to purchase based on the information you have. At this time, you should err on the side that there may be more than one offer on the property.
Contract Terms
Over the past couple years, buyers have been writing unprecedented terms on their offers to purchase. Buyers have been buying properties "as is," waiving inspections, waving appraisals or including appraisal gap riders, offering well over list price, and agreeing with the seller's preferred closing date. This isn't really necessary anymore. Ask your local real estate agent if the market in your area still demands this.
The Inspection Negotiations
The past couple years most buyers have basically performed inspections for their own knowledge. They wanted to know what defects the homes they were buying had so they could prepare for repairs and replacements. They weren't in the position to negotiate with the sellers for the issues found to be addressed before closing. Now, however, buyers may have a bit more leverage with inspection negotiations. If there are major defects or safety issues with the home you are purchasing, ask the seller to repair, replace or remediate those before closing. They may or may not agree, but it doesn't hurt to ask.
The Appraisal
Appraisers are becoming more cautious again. Their job is to protect the bank's investment, which is the mortgage on the house you are purchasing. They are going to start looking more closely at comparable sales. They will not be appraising homes too much higher, if at all higher, than the comparable closed sales.
In this market buyers still need to tread lightly. It is not a buyer's market yet and home values are still rising. The good news for buyers is that it is not a super sizzling seller's market anymore.
