Hopeful homeowners who have largely been priced out of the market thanks to bidding wars and inflated home prices got a bit of good news when real estate giant Redfin announced that the majority of homes that closed in the month of August did so for less than the asking price.
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While not all areas are experiencing this much needed (and definitely long-awaited) market correction, there are some places in the United States where homebuyers can get a deal when shopping for a new home. We spoke with a few real estate professionals to find out how buyers can get a bargain on their new home.
Why Has the Real Estate Market Made a Sudden Change?
Anyone who has been following home prices over the past few years has likely experienced a severe case of whiplash as home prices shot up in early 2020 and then suddenly began to decline as rising interest rates caused the demand for housing to slow. "Between rising home prices and interest rates, the payment for the same house has almost doubled compared to a year ago," explains Lindsay McLean, CEO and co-founder of HomeLister. "The housing market has been rising at an unsustainable rate over the last few years, and very high prices were already ripe for a correction or plateau, but then rising interest rates combined with inflation caused the current prices to be out of reach for many."
Now that the buying pool has shrunk a bit, there aren't as many people fighting over the same piece of property. Unfortunately for sellers, McLean said they've been slower to adapt to the changing market than buyers have, which has caused properties to close below their initial asking price.
Although it may seem like many buyers are offering lowball offers on homes to take advantage of the turning tide, McLean says the reality is that the homes are still selling for higher than they would have a year ago, making context very important for Redfin's new findings.
Look at the Comps
Even if the reason homes are going for less than asking these days is due to the market struggling to find its footing, Vanessa Grisalez, broker associate with Miami Residential Group, says there are some ways to walk away from your home purchase feeling like you got a good deal. "The first place to start is the comparison of that listed price against the most recent comparable sales," she says. "If you are in the lower-priced brackets — $500,000 or less — and the home's listed price is close to the latest achieved sales, offering above or close to asking is the way to go."
However, if the listed price is way above the latest achieved sales, then she says you should negotiate down. "On higher-priced listings, it's the same dynamic, but more often than not, you are offering less than [the] asking listed price; this is where I'm seeing most negotiations take place."
To find out what the most recent comparable sales are, talk to your real estate agent or look at recently sold homes that are similar in size, condition, and neighborhood on Zillow or REALTOR.com.
Look at Houses That Are Priced Above Your Preapproval (Within Reason)
Before you begin looking at homes, you should already be armed with a mortgage preapproval that will let you know exactly how much you can afford to spend on a home. Normally, it wouldn't be wise to look at homes that are priced above that number, but given that home prices are still trying to find their footing, Grisalez says there are still some instances where it's OK to look slightly above your budget.
If a home is only priced slightly higher than what a client can afford, Grisalez said she will be more open to showing her clients the property. "A great place to start is the listing agent being upfront about where the preapproval for the client lands and if they feel the home can be shown," she says. "If the negotiation range is there, the listing agent will be happy to show and provide access."
Keep Your Expectations in Check
The real estate market has been the topic of many conversations in the world of finance, leading some to believe that the new market shift may mean that the timing is finally right to make a move. While that may be true for some people, like those who have grown out of their existing home and need to make a change or for tenants who have realized that it may be more cost-effective to buy a home instead of paying record-high rents, McLean says others may need to steel themselves against the idea that we have finally shifted into a buyer's market. "Buyers and sellers will always have their own expectations about a market," she says, adding that she encourages sellers to focus on what's actually happening in the market instead of what they wish was going on.
"Sellers need to be aware that with affordability down and interest rates higher, lower offers will be coming in," she says. "At the same time, buyers need to realize that many sellers may be willing to wait another cycle or two to sell if they don't need to move so they can hang on to their own low interest rates."
You Can Still Get a Deal Even if You’ve Paid the Asking Price
Despite all the changes, McLean says this is still a relatively tricky market where some buyers may act faster than others, and some sellers may be more motivated than others, which is why she still encourages people to make offers that are based on the market comps, based on what they can afford, and based on how much they want that particular home. If this is your dream home or the one that will make your family (or your bank account) happiest, then you've already gotten a sweet enough deal just by getting your offer accepted.