There has been a lot of talk about the market cooling. Does this mean it is now the buyer’s turn at benefiting from market conditions?
A buyer’s market occurs when sellers have little or no power in the negotiating of the sale of a home. The buyer has an advantage in that there are more homes to choose from. Housing prices may also be down due to the negotiations of wise buyers.
Are we heading for a buyer’s market? Some areas have shown indications that we are. In many areas, home sales have slowed down. Homes are staying on the market much longer. The longer a home is on the market, the sellers should be more willing to negotiate.
Not only is the inventory of homes for sale going up, but the housing prices in some areas have stopped increasing. A few areas are actually experiencing decreases in housing values.
You may be saying that interest rates are working against buyers, but that isn’t necessarily the case. Interest rates still remain at a reasonably low level. What this means is that the average person can still afford to buy the average home.
In fact, interest rates help create a buyer’s market. With interest rates on the rise, many homeowners are experiencing monthly payments on their adjustable-rate mortgages. Some homeowners who purchased at the peak of the market are just now having their mortgages adjust. There are reports of payments doubling in size for some borrowers who took out risky loans.
Foreclosures are on the rise. People just can’t afford their homes any more. They have to sell and they have to sell quickly, before they are foreclosed on. With more and more homes popping up for sale, buyers will have plenty to choose from.
All of these conditions give buyers an edge in the real estate transaction process. Buyers don’t have to jump on the first home that they see because homes are no longer few and far between. In many cases, bidding wars won’t be an issue. Multiple offers may still occur, but buyers are likely to be a little more relaxed. Of course, this is in general — there will still be areas and neighborhoods that are experiencing a lot of buyer demand.
If you are looking at buying a home in an area that is experiencing a slow down or buyer’s market, you can use things to your advantage. Find out your seller’s reason for selling. It could be that time is of the essence, giving you an edge. If there are any contingencies that you need to include in the contract, now is the time. Sellers that are having a hard time selling their homes are more willing to do what is necessary.
Don’t forget to have the property appraised — and make sure that there is an appraisal contingency in your contract. If you are in an area that is experiencing quickly dropping home values and your closing is several months away, I would go ahead and have the property appraised for a second time close to closing.
You should also have the property inspected by a professional. This should happen in both buyer’s and seller’s markets. You wouldn’t buy a car without a test drive, so make sure that you at least look under the hood of the home.
Buyer’s markets are great for buyers. If you are in the market to buy a home, pay attention to the home sales in your area. But don’t worry too much about the market, what counts the most is buying a nice house that you can afford.