It’s no secret the housing market has softened in recent months.
Homes are no longer flying off the shelves, and bidding wars are becoming less and less common.
Instead of properties going way above asking, home sellers are delivering price reductions to prospective buyers, who are often nowhere in sight.
While some are quick to scream “Another housing crisis!,” for me it signals the return of a healthy housing market, one in which both buyers and sellers have leverage.
In reality, the past few years have been crazy – you shouldn’t have to write a letter to the seller begging them to accept your offer.
Fortunately, those days seem to be mostly behind us, depending on the metro in question. But it’s still easy to get caught up in the excitement and forget that you have power too.
Simply put, don’t be a desperate home buyer. Or a desperate buyer of anything. If you are, you’ll likely get ripped off, or at the least pay more than you need to.
Here are some things to consider to avoid being that desperate buyer, which might lead to a lower price and better choice of property.
Buy at the Right Time
First off, make sure it makes sense to buy a home at any given time.
This is part personal based on your life goals, needs, etc., and partially to do with the housing market in the area where you want to live.
While we can’t all control the timing, there’s no need to rush in when we’re talking about a costly home purchase.
It’s a big deal, and as such a lot of time and preparation should go into it. Forget about what those iBuyers are attempting to do.
One tip here is that spring tends to be the worst time to buy a home because it’s a time when the most prospective buyers are active.
While there might be more listings to offset the surge in buyers, it can be in your best interest to shop for a home during fall or winter, when competition is lower.
You could have an easier time negotiating with the seller, snagging a price reduction, getting repair requests approved, and so on.
The mortgage process might also be smoother if your lender, loan officer, underwriter, appraiser, and escrow officer aren’t totally swamped.
Get Pre-Approved Before You Shop
This is a no-brainer, and one I’ve mentioned on many occasions. Without a pre-approval letter in hand, sellers won’t take you seriously.
The real estate agents won’t either, knowing a mortgage isn’t a sure thing. So take the time to get pre-approved first.
This will also help you narrow down your property search to ensure you only consider homes in your price range.
It’ll also let you determine if you can bid a little extra if need be, knowing you’re approved for larger loan amounts.
Set Aside Cash for Down Payment and Closing Costs
One key component of a mortgage approval is cash on hand. Without it, you won’t have funds to cover the down payment or the closing costs.
Sure, there are lots of loan programs that require very little, such as Fannie Mae HomeReady or the FHA’s flagship 3.5% down mortgage, and even zero options from the VA or USDA.
But it helps to have money in the bank so you can present a stronger offer to the seller, and give yourself the ability to negotiate.
That extra cash could also come in handy if the appraisal comes in low, which is probably happening more often as the market eases and overinflated prices drift back down to earth.
Always, Always Negotiate
Speaking of negotiating, do it. Always. It doesn’t matter if it’s rent, a mortgage, or you’re getting a cavity filled. Always ask for a lower price.
It irks me that most folks are happy just to accept whatever price is thrown at them. Or whatever price the listing agent says the seller is willing to accept.
You can always go lower. In most cases, the seller is going to be more desperate than you, even if they’ve supposedly got multiple offers.
They likely need to sell their home because they’ve made the commitment to do so, and you don’t need to buy their particular home.
There are lots of homes on the market, so remember that.
Don’t Show Your Hand
A key tactic in the negotiating department is never showing your hand. And I mean never, ever, showing it, to anyone.
This includes your own real estate agent. If they know you’re in love with a particular house, they might not fight as hard to ask for credits or a lower price.
Sure, they should, but if you make it appear that you’re more than happy to walk, they’ll be on the phone with the listing agent warning them that the buyer is ready to walk.
That could be enough to get the sellers to act, and give into the buyer’s demands.
Be Willing to Move On
That being said, it is perfectly okay to walk away.
There are plenty of houses in the sea, and while it’s easy to get hung up on one particular property, it’s amazing how we often fall in love again and again.
More often than not, if a first property falls through or you don’t win the bid, you may look back grateful that it didn’t work out.
Typically, I hear something along the lines of “I’m glad we found this house.” Not “I wish we hadn’t missed out on that other home.”
Try to remember that when shopping homes and making offers.
Ultimately, it’s becoming more of a buyer’s market, which is great for those entering the market.
While home prices might appear steep, they aren’t so bad when you consider real housing prices adjusted for inflation.
And with mortgage rates so cheap, it could be a great time to lock in an absurdly low rate for the next 30 years.