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There have been many recent stories on television and in the paper talking about how many homes are for sale now, how it is taking longer to sell, and how some sellers are giving concessions to get the deal closed.
Some sellers are considering waiting to sell their homes in belief that the housing market will improve. Yes, the market is definitely in the buyer’s favor right now but this is the beginning of a multiyear trend. The number of houses for sale has increased each year for the last four or five years, and will probably continue to rise for at least another year. Houses that are priced correctly do sell relatively quickly. As interest rates slowly rise, this will put further chill on the market. Many of the homes that have had to reduce their prices were priced based on 6%, 8% or more appreciation over last year. In fact, appreciation is 1%-4% and will likely average 2%-3% each year for the next several years. So on $250,000, some of the houses listed are $10,000 or $20,000 high because the sellers think there should be higher appreciation than there really is. Prices may decline slightly but we are not seeing signs of any dramatic price depreciation… just flat or slight appreciation.
The competition that’s in the market means you do need to be competitive with others for sale, and that includes price, location, style, amenities and condition. So if you price the house with others that have newer appliances, roof, windows, furnace, flooring, etc then you would also need to have those features to be competitive.
As a seller it is tougher, but as a buyer you are more in the driver’s seat. Though you may not get quite a much for your current home, your next home will also be priced lower than it would be otherwise. If you’re planning a move to a higher price range, it should actually be in your favor. Additionally, interest rates are expected to rise .5% to 1% over the next 6-12 months, which can take 7%-15% of your buying power away because of the higher monthly payments.
So my suggestion would be that if you are planning to move in the next 18 months, then I would strongly consider moving now to take advantage of the good interest rates. If you’re comfortable for another couple years or more, then I wouldn’t worry about trying to time the market and just move when you’re ready to.
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With the Twin Cities housing market moving in favor of buyers, many buyers are negotiating more with sellers. Houses that are in good condition and priced correctly are still selling quickly, but the average home is for sale approximately 60 days before receiving an acceptable offer. While the current market does dictate that sellers be more accommodating to a prospective buyer, the market is not so bad that sellers are willing to “give away” their home.
While the change in the market has been easy to see as a buyer, many sellers are slower to understand the new market dynamics. Almost every seller I talk to says they have “the best house in the neighborhood and it will sell quickly because everyone will want to live here.” While agents do their best to educate their sellers about the market realities, many sellers are still not wholly convinced.
So when you see the seller’s home and you decide to make an offer, most buyers focus on the offer price and closing date. While those certainly are critical components, there are many other terms in a Purchase Agreement that are important, especially to sellers.
In today’s housing market you are likely inclined to make an offer below asking price… maybe substantially below asking price. While a low offer may not be what a seller is looking for, choosing the other terms of the contract carefully can help the seller see past the low offer price.
Closing Date. If at all possible, know the closing date that the sellers want and give it to them! Also find out if they need/want several hours, or a day, to get moved out of the house. If you feel comfortable allowing it and have the flexibility to do so, this is an easy way to reduce the seller’s anxiety.
Inspection. When your offer is presented, it helps to already have the appointment for the inspection ready to go and to schedule it as soon as possible. Keep the negotiation timeframe long enough to take care of any issues that come up, but short enough that the seller sees a quick conclusion to the inspection. 2-3 business days to complete an inspection, 1 day to make an repair requests, and 1-2 days to negotiate repairs is typical and preferred. While you can ask the seller to not show the home to other prospective buyers during the inspection period, asking for that provision is likely to upset the seller.
Financing. Sellers will expect a pre-approval letter, but many will also look for the buyer to provide a final commitment from the lender to close the loan. Most lenders can review the title work and appraisal and get final approval from the underwriter in 3 weeks or less. By providing this commitment to the seller, the seller has further assurances that the home will close and close on time.
Personal Property. When making an offer, you are trying to buy a home. Sounds simple, right? The Purchase Agreement is usually not the best place to ask for things other than the appliances listed included in the sale on the MLS printout and Seller’s Disclosure Form. If you’d like to add a special mirror, furniture, additional appliances, grills, etc. it is best to negotiate those items separately after the Purchase Agreement is complete. If you ask for too much or ask for something they have a personal attachment to, you may upset the seller over something that is easily replaceable by you after closing.
Explaining What’s Wrong. If you’re coming in low because the recent sales in the neighborhood show a market value below list price, or because there is extensive repair work to be done, why not explain those things in an attachment or cover letter to the offer? If a house down the street that’s exactly the same sold for less a week ago, mention it. If the house has old electrical, appliances and roof and all the other comparables had been updated, put in a reasonable estimate of what those upgrades would cost. Tact is important here, you want to explain your reasoning to the seller without insulting them or their home in the process.
In today’s housing market, you as a buyer do have an advantage, but the seller still needs to want to sell to you. Ultimately the terms you choose to make in your offer will depend on your individual situation and how important it is to you to purchase the home you are offering on.
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