Many renters in their 30s have been struggling to buy a house since the pandemic hit in 2020. This was the year they hoped for relief. Yet, affordability challenges keep mounting.
“First-timers feel the real estate market is ganging up on them, and unfairly so. It’s not just rising home values and short supply. Now they’re scared by jumps in mortgage rates,” says Mark Nash, the author of “1001 Tips for Buying and Selling a Home.”
But despite their aggravation, housing analysts say would-be homeowners are as determined as ever to finally reach their goal this year.
“With more sellers expected to enter the market as buyer competition remains fierce, we anticipate strong home sales growth,” says Danielle Hale, who heads the economics team at Realtor.com, a California-based property listing company.
Given their financial challenges, many home-buying hopefuls must rethink their aspirations, says Stacy Berman, a veteran real estate agent who sells property in the Washington, D.C., suburbs.
“To afford a place now, lots of purchasers must widen the scope of their search and consider neighborhoods not previously on their radar screen,” Berman says.
To win in a bidding contest, buyers must also take a strategic approach when crafting an offer. That means tracking local pricing trends in the area where they’re looking and learning about the seller’s motivations.
Here are a few pointers:
-- Inform yourself on local property values before you bid.
Eve Alexander, a Florida-based real estate broker who works solely with buyers, says buyers need context on prevailing values to make certain they don’t offer too much.
“For comparisons, try to identify five to 10 comparable properties that have sold recently in the area where you’re looking,” Alexander says.
If you’re seeking to buy in a neighborhood with widely varied properties, it’s helpful to compare the homes on your list on a price-per-square-foot basis. Then adjust for differences in size and home features, such as a two-car garage versus a one-car garage.
After estimating the current market value of the place you wish to buy, it’s time to decide how aggressive an offer you want to make. Alexander says that will depend on how enamored you are with the home.
“You won’t want to push the limits if you’ve fallen in love with the property and feel it’s a ‘do or die’ situation,” she says.
On the other hand, you might choose to make a lower offer if there are other available homes in the area that would meet your needs equally well.
“It’s always easier to negotiate without emotion if you can find second- and third-choice houses you also like,” Alexander says.
-- Avoid relying on comparable sales from “market testers.”
Eric Tyson, co-author of “Home Buying for Dummies,” says in every market there are a few sellers who won’t budge from an unrealistically high price.
“It’s a given that some supposed sellers aren’t really motivated to make a fair deal,” he says.
How can you tell which sellers are merely testing the market and will never negotiate seriously with anyone who bids less than their lofty list price?
Tyson recommends you ask your agent to find out if previous offers have come in on the property you want. If the owners have already rebuffed one or more decent offers without so much as a counterbid, this indicates they’ll probably resist reason with you, too.
The good news for buyers is that information on past offers is often readily available through the listing agent.
“Agents are inherently outgoing people. Some have very loose lips and will talk candidly about their clients’ negotiating position,” Tyson says.
-- Investigate the seller’s equity position.
Are you seriously interested in a home, but have yet to submit an offer on it? If so, Alexander says it’s wise to inform yourself on the sellers’ ownership stake before you bid. As she says, those with more equity have more potential room for compromise.
“What you’re looking for are insights into the mindset of the sellers,” Alexander says.
One source of clues on the owners’ equity position can be found by searching local government land records. At the minimum, these records (available online) should tell you when the current owners purchased the property and the original price they paid.
“If the sellers brought the house a couple of decades ago and haven’t refinanced, they should have a lot more equity,” Alexander says.
-- Ask your agent to pose questions to the listing agent.
When owners have an urgent need to sell, it’s normally against their interest for that information to be broadcast to the world, as it could weaken their bargaining position. Even so, Alexander says many listing agents will readily divulge such client information in response to questions.
“You’d be amazed how much listing agents will tell all to a buyer’s agent,” she says.
Another way prospective buyers can gauge the sellers’ level of motivation is to ask nearby neighbors. Alexander recommends that the buyers pick a weekend time to walk through the community, chatting with a few residents about the pros and cons of living there. In the course of the conversation, they’ll likely tell you what they know about why nearby homes are for sale.
“In many cases, well-informed neighbors will be happy to give you the inside story,” Alexander says.
(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)