In today’s real estate market, buyers shouldn’t shop for a
home with the expectation they’ll be able to negotiate a lower sales price. In
a typical housing market, buyers try to determine how much less than the asking
price they can offer and still get the home. From there, the buyer and seller
typically negotiate and agree on a revised price somewhere in the middle.
Things Are Different Today
Today’s housing market is anything but normal. According to
the National Association of Realtors (NAR), homes today are:
·
Receiving an average of 3.8 offers
·
Selling in just 17 days
Homes selling quickly and receiving multiple offers
highlights how competitive the housing market is right now. This is due, in
large part, to the low supply of homes for sale. Low supply and high demand
mean homes often sell for more than the asking price. In some cases, they sell
for a lot more. Selma Hepp, Deputy Chief Economist at CoreLogic, explains how
these stats can impact buyers:
“The imbalance between robust demand and dismal
availability of for-sale homes has led to a continual bidding over asking
prices, which reached record levels in recent months. Now, almost 6 in 10 homes
listed are selling over the asking price.”
You May Need To Rethink How You Look at a Home’s Asking
Price
What does that mean for you? If you’ve found your dream
home, you need to be realistic about today’s housing market and how that impacts
the offer you’ll make. Offering below or even at a home’s asking price may not
cut it. In today’s market, the highest bidder often wins the home, much like at
an auction.
Currently, the asking price is often the floor of the
negotiation rather than the ceiling. If you really love a home, it may
ultimately sell for more than the sellers are asking. That’s important to keep
in mind as you work with your agent to craft an offer.
Understand An Appraisal Gap Can Happen
Because of today’s home price appreciation and the
auction-like atmosphere in the selling process, appraisal gaps – the gap
between the price of your contract and the appraisal for the house – are more
frequent.
According to data from CoreLogic:
“Beginning in January 2020, nationally, 7% of purchase
transactions had a contract price above the appraisal, but by May 2021, the
frequency had increased to 19% of purchase transactions.”
When this happens, your lender won’t loan you more than the
home’s appraised value, and the seller may ask you to make up the difference
out of pocket. Buyers in today’s market need to be prepared for this
possibility. Know your budget, know what you can afford, and work with a
trusted advisor who can offer expert advice along the way.
Bottom Line
Bidding wars and today’s auction-like atmosphere mean buyers
need to rethink how they look at the asking price of a home. Let’s connect so
you have a trusted real estate professional who can advise you on the current
market and help determine what the market value is on your dream home.
Source: Real Estate with Keeping Current Matters
