For home shoppers, here’s the sad reality: Your bargaining power may never be lower than it is now.
That doesn’t mean a home might not be a good investment or the right thing to do. After all, interest rates are terrific and prices are likely to keep rising.
But it does mean the market has never been this stacked in favor of sellers.
“This is the most crazy market I’ve ever seen,” said Rebecca Ridley, an agent with Signature Real Estate.
Consider: As of the end of March, 1,639 homes were listed for sale in central Ohio that were not in contract already, less than half the number from a year ago.
Buyers who have been outbid, who have seen homes come on the market already in contract, who have rushed to an open house only to find a dozen competitors standing in line can take hope: Here are 10 steps buyers can take to help, and maybe even get a leg over the competition.
Be patient
In this market, this is rule No. 1. Homebuyers will find out soon that they are at a disadvantage and competing against hundreds of others buyers. Don’t expect to land the first house and don’t get discouraged after failing to snatch one up. More will come along and the more homes you see, the better prepared you’ll be to evaluate the next one.
“It can feel maddening seeing house after house, submitting offer after offer and getting the bad news that you lost out again,” said Jake Bluvstein, an agent with RE/MAX Connection. “The right house will come along. it always does.”
Get pre-qualified for a loan
This step is essential. Sellers considering multiple offers aren’t going to choose a buyer who might not be able to finance the property. Knowing what you can afford and being able to demonstrate that to a lender is critical, said Todd Helpbringer, president of Helpbringer Mortgage Services, a division of The Savings Bank.
“Get in front of a lender, get pre-qualified, know where you stand,” he said.
Some real estate agents recommend going a step further and getting pre-approved for specific properties you are making an offer on.
Explore ‘stale’ listings
In today’s market, a home that isn’t in contract in a week must be defective, right? Not so fast, say agents. Those homes could offer opportunities.
“People assume if something’s sat on the market for 10 or 15 days, there’s something terribly wrong with it, like an actual demon will greet you at the door,” said Lori Crabtree, an agent with Modern Columbus Realty. “But it might just be something you can live with or that can be fixed, like a pet smell or a strange layout. Sometimes it takes someone with a bit of vision to walk through it. … It’s also possible that the house went into contract and something happened, maybe the appraisal come in low.”
Be ready to offer over asking price
Central Ohio homes that sold so far this year fetched 100.8% of their most recent asking price. That’s right: On average, homes sold for more than their list price.
“You’re most likely not going to get a ‘deal’ in this market and you need to accept that if you’re going to compete,” Bluvstein said. “With many houses going over asking, the list price has become more of a ‘starting bid,’ like in an auction.”
That’s why some agents recommend skipping homes that are listed at a buyer’s top dollar. “Look under your maximum, so you can bid your maximum if you have to,” advised Coldwell Banker agent Cindy Calender.
Still, be careful: Just because it’s a sellers’ market doesn’t mean some homes still aren’t overpriced. With a real estate agent’s help, or by carefully examining nearby sales, do your best to independently determine a home’s true value before placing an offer. “Sellers now have the notion, ‘I can get whatever I want,'” said Columbus Realtors President Michael Jones, a Coldwell Banker agent. “That’s not necessarily the case. I see prices going down every day.”
Be ready to act fast
To the swift go the spoils of today’s housing market. Buyers must be ready to jump to a showing or a new listing within hours. It’s common now for agents to open homes for tours — sometimes for as little as 15 minutes — and then ask for all bids after a day or two. If a buyer can’t make those tours, it’s unlikely they will get a second chance.
“You really need to be aggressive and be prepared to make an offer that day,” Ridley said.
“It’s a very quick process,” Jones added. “It’s not as though you have the leisure of arriving 15 minutes early and strolling through the house in advance. It’s a very quick and decisive and deliberate process. You can’t be cavalier, you have to know what you want.”
Sweeten the pot
Forget asking a seller to pony up closing costs or pay for a home warranty or repair a bunch of things. Those days are over for now.
“Pretty much everything is being purchased as-is right now,” Crabtree said. “Sellers are not going to fix anything; that’s the norm now.”
Instead, buyers are the ones who have to offer the perks. Some common ones to consider: offer flexibility on the occupancy date if sellers need time to find a place; offer to waive any requests to remedy inspection problems (never waive the inspection itself, agents caution); provide earnest money with the offer so the seller knows you’re serious; offer to pay sellers’ costs such as title fees and real estate commissions; and offer to make up the difference between the appraisal value and the sales price, if the appraisal comes in low.
Escalation clauses — in which buyers agree to incrementally raise their bid to beat out competitors — are also common, although a growing number of sellers’ agents no longer want to deal with them.
Bring the cash
Cash is king in today’s housing market: In March, 23% of U.S. homes were bought without a loan, up from 19% a year ago. Sellers debating between a cash offer and a contingent-on-finance offer will take the cash every time. And having cash on hand is crucial to making up the appraisal gap (see above).
“There are so many people, so many buyers now, who have just so much cash,” Crabtree said. “They’ve taken advantage of the market, or they bought that big house in Powell to raise their kids and they’ve sold that, and now they’ve got $500,000 in the bank. It’s really difficult for the average 30-year-old home buyer to compete with that.”
To find more cash, Jones suggests looking at your 401(k) or other investments, although some financial advisers caution against borrowing from your savings.
Be willing to compromise
With so few homes available, this probably isn’t the time to hold out for your perfect home. Maybe three bedrooms will work instead of four, or you can live without a full basement. And maybe you don’t need to live right in the city.
“Buyers may have to change their strategies,” Crabtree said. “I’ve had folks actually change where they are looking for housing. They started out looking in one particular area, and after losing several bids started looking out of town, in Lancaster, Newark and other places, where the competition is less intense.”
Along the same lines, look past cosmetics that can easily be changed — wall color, flooring, lighting fixtures — and instead focus on the big-ticket items: the roof, foundation, layout, kitchen, furnace and windows.
Look beyond Realtor and Zillow and the Multiple Listing Service
Many homes change hands without ever really being listed because buyers and sellers connected early. Some deals are struck at neighborhood cocktail parties — Grandview Heights, for example, has a reputation of being a very insulated real estate market. Those networks might be hard for an outsider to penetrate, but an agent familiar with a particular neighborhood can be a huge asset.
Also check social media. Some communities have very active real estate sites where upcoming home listings are routinely mentioned. The Worthington Real Estate Group on Facebook, for example, regularly mentions homes that might be coming on the market. Look for a site in a neighborhood or community you’re interested in.
Along the same lines, don’t be afraid to write some letters or post a notice on social media expressing interest in a home or a neighborhood. Sure, it’s a long shot, but it’s also been known to work.
Or consider a new home, more of which have been built during the pandemic.
Consider waiting
This market is brutal for buyers. Even though interest rates are attractive, if you don’t have to buy now, consider waiting until the playing field is more level. More homes are almost certain to come on the market.
