A decade ago, after the residential real estate market tanked, bargains were rife and qualified buyers had their pick of properties at reasonable prices. But now the picture is vastly different.
“Today, home prices are at or approaching record highs in many markets,” says Lawrence Yun, chief economist for the National Association of Realtors (realtor.org).
Yun forecasts that some of the nation’s most overheated real estate markets will experience sales slowdowns as 2018 progresses.
“Drops in home sales can be connected directly to supply shortages and corresponding price increases,” he says.
Buyers still determined to snag a decent deal in a popular neighborhood should consider what’s known as a “stale listing," according to real estate pros.
“Stale listings can be a treasure trove of good values,” says Stephen Israel, the president of a real estate firm affiliated with the National Association of Exclusive Buyer Agents (naeba.org).
What sets stale listings apart is that they’ve sat unsold for longer than the average selling time for their neighborhoods. But Israel cautions that selling times can vary widely depending on the popularity of a community and the local economy.
“Look at each home individually and find out its listing history. It may be the home was listed with a different agent before and then later relisted with a new agent. Because of that, you may need to dig to determine how long it’s really been up for sale,” he says.
Sid Davis, a real estate broker and the author of “A Survival Guide for Buying a Home,” says the most common reason a property goes unsold for a lengthy period is that it was overpriced when it first hit the market. Even after a series of price reductions, such a home typically retains its stigma, which continues to drive away potential buyers.
“The longer a house is on the market, the less it sells for. That’s one of the tenets of real estate,” Davis says.
Here are a few pointers for buyers:
-- Inform yourself about values in your target neighborhood.
Many who are open to the idea of buying a stale property are novice buyers on limited budgets. To navigate the market with confidence, Davis says they need to inform themselves about property values in the area where they’re searching.
“Do your homework before going out and making any offer,” Davis says.
Very often, the owners of a stale property will ratchet down the price in incremental drops. The key for a prospective bidder is to know when the sellers are approaching a realistic price point.
“You and your agent need to do a thorough analysis of the area so you’ll have a good feel for the true value of any house you like. That way, you won’t be flying blind when you venture a bid,” Davis says.
The key to determining market value is to closely examine the data on recently closed home sales on similar properties -- known as comparables, or comps for short.
“Make sure your agent shows you very recent comps that are really similar to the house you want to buy,” Davis says.
“When deciding how much to bid on a stale listing, don’t focus on the list price. Instead, orient your offer to what the market is really paying for that kind of a house in that neighborhood.”
-- Set up a system to ensure you’re alerted when price drops occur.
Have you found a home that’s appealing, but believe it’s significantly overpriced?
If so, Israel suggests you track that property closely, waiting for its owners to take a price cut that brings it closer to its true market value.
To stay alert to potential pricing changes for the property of your choice, Israel recommends you ask your real estate agent to keep you constantly updated by email or text.
“Ideally, you should be kept informed on a daily basis,” Israel says.
-- Seek to time your bid advantageously.
Are you focused on a particular property whose owners have finally agreed to a major price reduction after the place has lingered on the market for a lengthy time? In that case, you may be tempted to come in right away with your bid.
But Israel says it still could be wise to wait for a few days before bidding on a formerly overpriced place. That’s because typical sellers will wait a while after cutting their price before entertaining any offers.
“Of course, there are always exceptions. If you’re really in love with the house and think the sellers are finally realistic on price, don’t wait any longer. Bid right after the price drop or you could risk losing your dream house to another offer,” he says.
(To contact Ellen James Martin, email her at firstname.lastname@example.org.)