In the ever-evolving landscape of the real estate market, buyers are currently poised to leverage some significant advantages. While sky-high interest rates may initially seem daunting, the resulting decrease in buyer demand has ushered in a unique environment, offering home buyers more negotiating power than we've witnessed in recent memory.
The conditions have shifted to favor those looking to make a real estate investment. In this article, we'll delve into the five key advantages that home buyers are currently enjoying in today's housing market. Moreover, sellers are also encouraged to embrace creativity in providing incentives that cater to buyers' needs, ensuring a win-win situation for everyone involved in the real estate game.
So, let's explore these advantages in greater detail and understand how both buyers and sellers can make the most of the current real estate climate.
Advantage 1: Lower Prices
Buyers are increasingly purchasing homes below their original offer price. As demand subsides, fewer bidding wars mean sellers are increasingly reducing their prices or accepting offers below their asking price. In September, homes sold for around 3% below the asking price on average. In 9 out of the 10 months this year, prices have been down year-over-year. If there's a home you love that seems over your budget, it might be worth submitting a lower, but reasonable, offer.
Advantage 2: Keep Your Contingencies
Previously, fierce competition forced many buyers to waive protections like appraisal and inspection contingencies, exposing them to major financial risks if issues emerged. Now, with demand declining, buyers regain leverage to keep contingencies intact, allowing for proper due diligence without compromising their position. Appraisal contingencies protect against sudden appraisal gaps, while inspection contingencies let buyers uncover problems early, enabling smarter, safer purchases.
Advantage 3: Negotiate Repairs
As homes linger on the market for extended periods, sellers are becoming increasingly anxious, often trading patience for worry. This unease prompts sellers to question whether there might be aspects of their home's condition deterring potential buyers. Consequently, some sellers proactively offer to perform or cover the cost of necessary repairs, while others become more open to accommodating buyers' requests for repairs.
TIP: If you come across a home you adore but have concerns about its condition, don't hesitate to discuss potential improvements with the seller – they might be willing to assist.
Advantage 4: Closing Cost Credits
Sellers are increasingly willing to cover buyers' closing costs, saving them thousands of dollars. Closing costs are the expenses over and above the property's price that buyers incur to complete a real estate transaction. These costs may include loan origination fees, discount points, appraisal fees, title searches, title insurance, surveys, taxes, deed recording fees, and credit report charges.
Many lenders will allow sellers to cover these fees for buyers which means this is actual cash (thousands of dollars) that buyers can keep in their bank accounts instead of paying in addition to their downpayments at the close of escrow.
Advantage 5: Mortgage Rate Buy Downs
With high mortgage rates squeezing affordability, some savvy sellers offer rate buydowns, temporarily lowering rates by 1-2 points for an upfront fee. This reduces monthly payments for the first few years, making deals feasible for buyers facing high rates.
This incentive often beats large price cuts, letting sellers maintain value while making deals feasible for buyers facing current rate shocks. As rates remain elevated, buydowns emerge as win-wins. Sellers drive demand and close sales, while buyers gain payment relief when they need it most.
For Sellers: Get Creative with Incentives
Sellers, rest assured, the current real estate landscape still predominantly favors your position. Although it may seem like a transition away from the miraculous conditions observed in the years between 2020 and early 2022, this does not signify a loss of opportunity.
What we're experiencing is a market shift, gradually returning to a more typical state. While the pace may feel less frenetic and, in some instances, even seemingly sluggish, it underscores the importance of adopting a more collaborative approach. Simply placing a 'For Sale' sign in your yard, though essential, might no longer be enough.
Sellers can proactively introduce inventive incentives without causing significant financial strain. By embracing resourcefulness and a willingness to align with today's buyer needs, it becomes possible to create a scenario where everyone emerges as a victor in the real estate realm.
Today's housing market offers distinct advantages for both buyers and sellers. With buyer empowerment growing and a return to more balanced conditions, it's essential to harness these insights to navigate this evolving landscape successfully. Regardless of whether you're in the market to buy or sell, understanding these shifts and approaching them creatively can pave the way for successful real estate endeavors.
Whether you're a buyer securing a home below asking price, a seller employing inventive incentives, or a collaborative participant in the ever-evolving real estate ecosystem, the potential for success in this environment is greater than ever. With the right strategies and a willingness to adapt, every player can find their path to victory in today's real estate arena.