These days, even with higher interest rates, most people aren’t too worried about how their home will fare on the market. But people are concerned about finding and affording replacement homes. Rates and prices are high, there aren’t many options, and competition is stiff for the “good” homes.
Bargains are out there
That said, listings are expected to increase this spring, and there will be bargains among them. And the more market value a seller-buyer can get per dollar, the more home equity they’ll end up with and the more they’ll offset their higher interest rate.
However, the key will be knowing how to identify and capture these bargains. Here are three tell-tale signs that a listing may be (or may end up being) a steal.
1. Homes that are over-priced
It sounds crazy, but over-priced listings will be great opportunities this spring. These homes are usually the cream of the crop; modern, gorgeous, and in top condition, but with over-zealous sellers. Today’s buyers don’t even look at homes they perceive as overpriced. These homes will languish on the market this spring and end up selling for significantly less that they should.
The key to getting a below-market price on an overpriced home is to wait a month or two, if you can. If it sells within that time frame, the buyer probably over-paid, so you didn’t lose out. But if it hasn’t, the price will likely go down and the seller will be feeling the heat. That’s when you make your move; determine the maximum you’re willing to pay and offer a little less. You won’t face much competition (even with a lower asking price) because buyers are turned off by homes that sit on the market. The seller may accept your bid outright or counter for a little more, close to the maximum you had in mind.
2. Homes that have been re-listed
Homes that have been taken off the market and re-listed (or that have been on the market well over a month) can also be great opportunities. Usually these listings were originally over-priced, but there can be other reasons they failed to sell. In my experience, lack of seller flexibility (with price or otherwise) tends to be the biggest drag on a listing’s success.
Your bidding strategy with a home like this will depend on its reason for not selling. Work with your agent to figure that out, and adapt your approach accordingly. Whatever the reason, after months of frustration the seller will be more open to compromise.
3. Homes that look unappealing
Homes that are in excellent condition, professionally staged, and attractively priced are selling like hotcakes right now. Expect competition for these listings to be stiff and for the final price to get driven up substantially. This is a fantastic way to position your listing as a seller, but not the kind of property to expect a deal on as a buyer. Remember: it’s easy to fall in love with a home, and those emotions can be quite costly.
This spring, instead of entering the ring on a hot listing, use your left brain and look for a home that doesn’t show well. Evaluate its “bones” (layout, lot size, location, exterior, etc) rather than its cosmetics. Then tally up the cost of painting, re-carpeting, landscaping, or whatever it would take to make the home gorgeous. I guarantee you, in today’s market, the math will come out very much in your favor. Not only will the “fair market” price be lower-than-average to account for the defects, your final price may end up well below that.
Negotiate to win
When it comes to negotiating, certain tactics will work better for buyers than others this spring. These strategies will help you even if you are bidding on a desirable, full-price property.
Think outside the “price” box: It’s natural for both sellers and buyers to focus on a home’s top-line price. Sellers are more likely to agree to certain concessions than a price break (and buyers are more likely to ask for a discount than a concession), even if the dollar-for-dollar impact is the same. This is an especially useful insight for buyers in a competitive situation. Instead of offering less, ask for a home improvement allowance, closing costs, or a rate buy down credit.
Compromise where it matters: Like you, your seller is dealing with the stressors and unknowns of a major move. Certainty and flexibility can be more valuable to them than a higher price. To get the best deal, think carefully about how much of your own certainty and flexibility you are willing to sacrifice. For example, if you’re confident your existing home will sell, consider making an offer that isn’t contingent on your home’s sale. This could easily beat out a higher, contingent offer this spring.
Get in touch
The most important thing a buyer can do these days is hire an experienced agent. Don’t carefully vet a listing agent and then assume they’ll handle your purchase well. An enormous amount of strategy will be required on both the selling and the buying side to get the best results this spring, so make sure your agent is skilled in both areas.
I’ve been in the real estate business for a long time, through many ups and downs. My team and I have helped about a thousand families right here in the Phoenix area successfully buy or sell a home, whether conditions were good, bad, or somewhere in between. Give me a call today at 602-753-0177. I’m eager to help make your next move a success, too!
