What is happening this fall in the Real Estate Market?

Rate Update For the Week of 10/3/22
  Last WeekThis WeekChange
Fxd 30 *6.76.79Worse by .09
Jumbo Fxd 30*5.955.85Better by .1
5/1 ARM*6.126.05Better by .07
VA/FHA Fxd 30 *6.256.55Worse by .3
10 Yr US Treasury3.7413.801Worse by ..06 (rates tend to go up when yield goes up)
 5% 30 YR UMBS97.597.781Better by .281 (rates go down when the bond price goes up)
     *From MND’s Rate Index  

Deals will hinge on negotiations this fall. Here’s how buyers’ agents win

‘There was no negotiation over the last couple of years,’ Max Stokes of Compass says. But that’s beginning to change — gradually. With a few tips, buyers can prevail at the negotiating table

BY LILLIAN DICKERSON

It’s been a long couple of years for homebuyers and their agents.

The pandemic-fueled tornado of low inventory, tons of buyers flocking to the market amidst record-low interest rates and would-be sellers holding onto their homes for fear of being left out in the cold with no place to go, made for a brutal homebuying experience in many places.

“Last year, it was pretty much come in every house guns blazing, do whatever you could do to acquire that house,” Max Stokes of Compass in Northern New Jersey told Inman. “There was no negotiation over the last couple of years.”

But the tides are turning.

Volatile — and comparatively high — interest rates coupled with an uncertain economy are starting to shift the market’s balance. Sellers don’t have the hold on the market that they once did. And it’s time for buyers to start taking advantage of the shift.

As a balanced market comes into view on the horizon, here’s how buyers’ agents are changing their negotiation tactics to help their clients achieve some wins that were once impossible in the frenzied market of the last two or so years.

Ask the developer to cover closing costs on new properties

On new development properties in Manhattan, where Leslie Singer of Brown Harris Stevens works, the taxes folded into closing costs can be a lot to swallow. In the past few years, sponsors (another term for developers) have typically put the onus of mansion and transfer taxes on the buyer of the property.

On New York City properties priced below $500,000, transfer taxes are 1 percent and on pricier properties, that tax increases to 1.425 percent. Mansion taxes kick in on properties priced at $1 million or higher and range from 1 percent to 3.9 percent, depending on the exact price.

But in this market, Singer said developers are a lot more willing to negotiate.

“In these types of markets, sponsors may be more flexible on the backend, such as assisting with closing costs,” she told Inman.

Leverage different listings against each other

With inventory staying on the market a bit longer these days, buyers have the time to comfortably compare different active listings — and potentially leverage them against each other if a seller is really being a stickler when it comes to negotiating, Stokes said.

With properties that he has represented recently, Stokes said homebuyers have pointed out to him other similar properties in the same market, and why they might be a better offer than his own listing, lighting a bit of a fire under the seller.

“[They’re] pointing out the differences in the comparables that are on the market and trying to leverage three [listings] against each other,” Stokes said.

Marry the house, date the rate

With elevated mortgage rates, a lot of buyers are hesitant to get out into the market now. But Gretchen Rosenberg of Kentwood Real Estate in Denver said that she and her agents are encouraging homebuyers to get off the fence and commit to a home if they love it. Mortgage rates will be in flux for a while, so buyers should get the house they want now and keep refinancing for a better rate in mind for the future. In other words, “marry the house and date the rate,” Rosenberg said.

“We are out there talking rates and just reminding buyers again, hopefully this is a longtime purchase. It’s not a year, it’s not like you’re a renter, you’re going to be in it for a while, and so someday down the road — we don’t know when, we can’t promise when rates will come back down — you’re likely going to be able to refinance. You also might be able to buy down the rate now, depending on your position.”

Get more recent data to back up the best offer

In the past, Rosenberg said she might gather comps from the last six months of sales to inform her buyer’s offer on a property. But with the market changing rapidly over the last few months, in large part as a result of volatile mortgage rates, Rosenberg said data from six months ago is already out of date. To help buyers craft the best offer that’s most likely to succeed, her agents are digging into data from a neighborhood’s most recent sales.

“They’re diving more into the data,” she explained. “They’re saying, well, what have the last couple of sales been? Not the last six months of sales, which is what we would normally do to comp a house, but the last couple of sales in this neighborhood, and how many price reductions have there been in this neighborhood? What are the days on market now? What’s the percent original list versus final sale price in the last 30 days?”

Don’t waive your rights

Stokes is working with homebuyers now who also transacted a home earlier in the pandemic, and he said he had to make it clear to them that waiving things like a home inspection or appraisal were concessions they wouldn’t even consider this time around — even if he didn’t necessarily encourage it the first time.

“You don’t need to do that anymore,” Stokes said. “The market’s normalizing, if not turning, so keep your rights in the contract … there’s no reason to do it just to do it.”

“People were voluntarily waiving [inspections] and just doing escalation clauses,” Dawn Maddux of Engel & Völkers Western Frontier in Missoula said. “In the 11 years I’ve been in real estate, I’ve not ever seen that before … Now, we’re kind of getting back to writing normal offers, maybe at or a little below asking price based on what the market will bear and based on what comps show, where before, it was just a frenzy.”

Press pause

Along the same lines, Maddux elaborated that homebuyers shouldn’t feel rushed to make decisions before they’ve done all their due diligence on a property, and buyers’ agents should actively encourage this to avoid regret later.

“They have time to do their research there — there’s not a frenzied competition,” Maddux said. “It’s honestly better for the seller because, what we’re seeing happen, is there’s a lot of lawsuits pending where buyers jumped into properties, they end up with buyer’s remorse, they [find] out something [about] the house that the seller didn’t disclose, probably because they didn’t know about it, and they didn’t get an inspection so they wouldn’t have had a way to know.”

In this market, when a deal isn’t as sweet as a homebuyer or the buyer’s agent feels it could be, under the right circumstances, there’s no shame in even stepping away from the negotiations for a week or two altogether.

That opportunity arose recently for Stokes and one of his buyers, who was interested in a fixer-upper that he thought was overpriced given how much money would need to go into renovating the property.

“I said, ‘Well, there’s not going to be many buyers out there that are going to be willing to take this on their shoulders right now,” and [the sellers] disagreed,” Stokes told Inman. “And I just told my buyer, ‘Just trust me — you’re one of the only buyers out here that would do this right now. Take a deep breath, sit back, and let’s just watch this for a minute.’”

The seller reached back out a week later, wondering if they were still interested, and Stokes said they were considering some other options. Another week after that, the seller reached back out again and said they would drop the price to match the buyer’s offer

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Make An Impression

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Must have a good location when selling your HOME

Add seasonal flowers for curb appeal

One thing is common among all properties that receive multiple offers these days: the home is in a good location. Location is nearly always what drives homebuyers in their search. Before considering price, number of bedrooms or size of home, a buyer looks for location.

If your home is on a busy street, not in the best school district or near a freeway on/off ramp, chances are you won’t receive the kind of activity that a well-located home would. In that case, work closely with your agent to price the home correctly.

Must be priced right

Buyers in any market look for perceived value. Homes priced 10 percent (or more) over their market value won’t get noticed. Pricing isn’t an exact science, and it’s nearly impossible to pin a precise number to a home until buyer and seller sign a contract and close. Then, the price officially becomes the home’s market value. Until that time, agents can provide sellers with a value range. Have a good location? Does your home show well? Are you in a strong sellers’ market? Price your home on the bottom of that price range and you’ll be sure to attract buyers — and possibly multiple offers.

Must show well

A generation ago, sellers simply did some deep cleaning and maybe some de-cluttering before their first open house. Presentation wasn’t as important then as it is today, given online listings. More buyers today develop an emotional connection to a home. They want to imagine themselves in your home and not feel like they’re a guest. What does that mean? Appeal to the masses. If you have a good location and you plan to price your home realistically, then you need to make sure you give buyers what they want. If you can afford it, make cosmetic upgrades; invest in some staging and work to turn your home into a “product.” Emotionally disconnect from your home and try to see it more objectively.

Plan on having the home in perfect condition for the photo shoot. A buyer’s first impression of your home likely will be via the Internet or an email from their agent. Make them want to step inside. The more buyers you attract to your home, the more activity.

Know your market

Don’t assume that national trends apply to your region, city or neighborhood. If you’re not in a strong sellers’ market or you spend a fortune on last-minute upgrades, you could be in for a giant surprise. Just because you hear about bidding wars and multiple offers on the news doesn’t mean that applies to your area. Home selling is like the stock market it is goes up, down and can have a bit of a lull when interest rates go up and what is happening in the news for your area and even around the world.

Work with a good Realtor and, no, not all agents are Realtors learn the difference.  A local Realtor knows the area and what has recently sold as well as ones that have sold over the past six months to a year. Knowing those homes, having walked inside and personally knowing the agents who have sold them matters. This is market data that an outsider just doesn’t have access to. This knowledge empowers good local agents to educate their sellers.

Rental payments now to be included as part of purchasing a home.

Hey RENTERS we have good news!  Rental payments now to be included as part of the underwriting process!

Happy Home Buyers.

What does this mean?

Did you know that effective Sept 18 Fannie Mae has allowed rental payment history to be included in the underwriting process. Essentially making it easier for renters to become homeowners!  

Rent is most times the largest expense for families and history of paying it on-time will now be considered for credit worthiness.  With Fannie Mae’s new guideline, any missed rental payment wont’ keep you from getting a mortgage.  With what’s going on around us, this couldn’t have come at a better time.

“For many households, rent is the single largest monthly expense. There is absolutely no reason timely payment of monthly housing expenses shouldn’t be included in underwriting calculations,” said Thompson. “With this update, Fannie Mae is taking another step toward understanding how rental payments can more broadly be included in a credit assessment, providing an additional opportunity for renters to achieve the dream of sustainable homeownership.”?

Those you might have been previously rejected due to lack of credit history may have greater chances getting into their dream home.

If you think this will benefit you, reach out today and let’s hop on a call to discuss next steps!

The Home Connection

Happy Tuesday and Welcome to August! Yep, I am a few days late on the monthly newsletter please forgive me I was having a very fun weekend at the Gorge and Watershed. A bit slow and tired today but it was worth it. 🙂 So as we slide into August enjoy with some great events, ideas, tips, real estate news and its National watermelon day so go enjoy!

The Home Connection Feb-2021

Your Home Connection Newsletter

I hope you all had a wonderful Thanksgiving and weekend! Here is your December issue of our Newsletter. With your eye on this crazy busy market, tips and includes some gift ideas! 😊 Have a blessed, happy and safe holiday season.