For many wannabe first-time homebuyers, pursuing their goal feels like running on a treadmill at the gym. They keep up the speed, but never gain any distance.
The problem is that in recent years, overall home prices have continued to escalate, says Frank Nothaft, chief economist at CoreLogic, which tracks housing markets nationally. What’s more, due to a shortage of available property in popular metro areas, he forecasts that prices will rise 5.8% between now and August 2020.
But the good news for buyers is that if they’re both patient and strategically minded, they may be able to snag a decent deal on a property, even in a highly coveted area, says Stephen Israel, president of a real estate firm affiliated with the National Association of Exclusive Buyer Agents (naeba.org).
Israel urges buyers to consider properties that have languished on the market for a lengthy period -- what are known to the real estate industry as “stale listings.”
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 results in a shrinking pool of possible 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 on prevailing property values in your target area.
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 educate themselves on property values in the area where they’re searching.
Very often, the owners of a stale property that was overpriced from the beginning 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.
The key to determining market value is to examine closely the data on recently closed home sales on similar properties, known as “comparables.”
“Make sure your agent shows you very recent comps that are really similar to the house you want to buy,” Davis says.
-- Ensure you’re alerted promptly when price drops occur.
Have you found a home that’s appealing but believe is still 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.
“Ideally, you should be kept informed on a daily basis,” he says.
Also, you can sign up for automatic email alerts from one of the several websites that track real estate listings and price changes. These include the sites of such data-driven firms as Trulia and Zillow.
-- Create a compelling contract offer.
Gregg Busch, vice president of a mortgage lending firm, urges bargain-minded buyers to present the sellers of a stale property with a bid that addresses their need for a sure and urgent sale.
“To get the best possible price, you need the strongest possible offer, which shows that you could really go through with your proposed deal,” Busch says.
How can you make your bid stand out from the others the sellers may receive? One way is to obtain a convincing letter of “pre-approval” from your mortgage lender.
“You want a letter showing that an actual underwriter is committed to doing your deal. Underwriters -- not the ‘loan reps’ who work with the public -- are the ones who have the final say on loan approval,” Busch says.
Also, if feasible, he recommends you propose a quick closing date in your offer. That should make your bid especially appealing to the owners of a stale property, particularly one that’s gone vacant after its owners moved away.
-- Seek to time your bid advantageously.
Are you focused on a particular property whose owners have finally taken a major price reduction after the place lingered on the market? In that case, you may be tempted to come in right away with a low bid.
But Israel says it’s often wise to wait at least one or two weeks before venturing your low bid on a stale property. That’s because typical sellers will wait a while after cutting their price before entertaining a low offer.
“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,” Israel says.
(To contact Ellen James Martin, email her at firstname.lastname@example.org.)