The pandemic-fueled home-buying frenzy is over, but hopeful home buyers shouldn’t expect an easy process this spring.
Working against buyers is a continued affordability crunch given the median single-family existing-home price rose 4% in the past year to $378,700, according to the National Association of Realtors. Mortgage rates are hovering above 6%, with more rate increases to come. In addition, inventory levels remain low since about 70% of homeowners have a locked-in lower mortgage rate.
Potential buyers are entering an improved market where bidding wars are less common and homes are staying on the market longer, said agents. In January, homes nationwide were on the market a median 51 days, an increase of more than three weeks from a year ago, according to Redfin. There is also less competition with investors buying fewer homes last quarter than they have in years.
For those wading back into the market this spring selling season, don’t be so quick to make concessions. Agents said that the days of waiving home inspections are gone. Hopeful buyers should also be prepared to move quickly and possibly make offers on homes that aren’t currently listed.
“Buyers may be in a more favorable position than they were in 2021 and early 2022, but expect negotiations to be in sellers’ favor once again,” said Matthew Speakman, senior economist at Zillow.
Here are four strategies for how buyers can boost their odds of getting a house this spring:
Consider reasonable concessions
Given the market has softened, buyers should find out what the seller’s pain points are and see how they can address them, said Ben Dixon, a real-estate agent in New York City.
Price is generally at the top of most sellers’ lists, but there are other ways to make an offer attractive, he said. If a seller has an open permit on a home renovation, the buyer might offer to finish the job.
Check with local agents to understand what type of concessions are appropriate in your market now as it varies by ZIP Code, agents said. These concessions can be the key to getting a deal done as buyers received concessions in 42% of home sales in the fourth quarter, up from 31% a year earlier, according to Redfin.
One of the most common concessions is money for home repairs, such as replacing an old roof or furnace, according to Daryl Fairweather, chief economist at Redfin.
Buyers who don’t have a lot of cash for a down payment could negotiate a credit on the closing costs of the transaction, said Ruthie Ravenel, a realtor in Charleston, S.C. A buyer could offer $15,000 over the list price and ask for a $15,000 closing-cost credit. In this case, the seller’s take-home funds are nearly the same as a full-price offer. The buyer’s cash out of pocket is reduced at closing though they do have to pay more over time.
Line up financing
Cash offers and strong financing continue to often win out over higher offer prices. Buyers should aim for a down payment of 20%.
Problems with financing and home inspection are among the most common reasons for contracts falling through, said Avi Adler, a real-estate agent in Bethesda, Md.
A cash offer is king for a buyer looking to play hardball. For many, it isn’t a viable option.
Some lenders offer programs that enable a buyer to become fully approved before an offer being made. This can be very attractive to a seller over a simple preapproval letter that hasn’t gone through the lender’s underwriting process yet. These types of programs, available at some banks, have a high rate of closing and reduce the chance of the contract falling through, said Mr. Adler.
Dig up old listings
If buyers can’t find what they want on the market, their agent could inquire with owners who took their property off the market this fall, said Kimberly Jay, a real-estate agent in New York City. Zillow listings show when a home might have been previously listed.
Consider homes that have sat on the market for more than two months and offer a discount, said Lawrence Yun, chief economist at National Association of Realtors. For instance, a home initially listed at $500,000 will get sold roughly at a 10% discount ($450,000) after 60 days, he said.
Look at privately held properties
Some home-buying companies, such as iBuyers—that buy and flip homes with the help of algorithms—have hundreds of homes in inventory and might be willing to negotiate to get them off their books, said Rick Sharga, chief executive of CJ Patrick Company, a real-estate consulting firm.
Buyers should also keep an eye out for distressed or foreclosed properties, particularly if the economy enters a recession this spring. Some owners would rather sell their home at a profit to avoid losing everything to a foreclosure auction, said Mr. Sharga.
Buying in foreclosure, however, can be a fraught process for many reasons. Buyers are often best served finding an agent with expertise to guide them through the process.
Write to Veronica Dagher at [email protected]