2020’s housing boom has continued into 2021 with no signs of letting up any time soon. With more and more homeowners refinancing as mortgage rates are lower now after interest rates have dropped, a new swath of first-time homebuyers have also entered the market, looking for ways to buy a home in the United States. In many major US cities, sellers are getting well over the asking price on the homes they’ve listed, which can lead to a lot of discouragement for first-time buyers interested in acquisition but unsure of whether or not they need to throw in the towel or just keep trying. While you may have the right cargo management system to handle your move with your trusty pickup, without an accepted offer on a listing going under contract, it can be easy to think that maybe homeownership isn’t on the table for you this year.
While all of this definitely sounds grim, and it’s easy to get cynical about the housing market if you’re tired of living in apartment communities, it’s not impossible to get into the real estate market, even in today’s climate when the past year has seen home prices soar as mortgage rates have decreased. If you’re really serious about moving homes during the COVID-19 pandemic, it’s definitely possible to have a bid get accepted—so long as you know how to negotiate and what’s worth negotiating. While some of the following tips may seem a bit extreme to homeowners who purchased before the pandemic (especially with the last week showing that the market continues to stay red-hot), some of these strategies may be useful as you look to get a good deal on a home. Here are a few tips and tricks to keep in mind as you look to negotiate a home’s price.
Expand your search of properties.
If you feel like you’re constantly getting priced out based on what you’re looking for, it might be a good idea to think through your list of wants and needs again. Sure, it might be more comfortable to have a three-bed, two-bath home, but can you give up a bedroom or a bathroom in order to be able to bring more cash to the table? With so many investors buying in with all-cash offers and expecting to make profits on their investments rivaling the S&P and NASDAQ, compromising on a property for 1200 sq ft instead of 1800 sq ft could be worth the pivot.
Another thing to think about is getting into multi-family homeownership instead of looking for a single-family home. Especially if you don’t mind being a landlord or having renters, this can be a great way to help cover the costs of homeownership, since charging rent is usually going to cover most, if not all, of your mortgage. John Foresi from Venterra Realty has done just that, ultimately generating over $3.0 billion in value based on the real estate assets Venterra manages. Of course, if you’re just looking at a three-flat, you won’t be making billions, but thinking outside the box may allow you to make an offer in a less competitive market.
Waive your appraisal or inspection contingency.
While this is a very risky move to make, in some markets in the U.S. buyers have no recourse but to waive some contingencies when making a bid against all-cash offers. That being said, it’s important to understand what waiving these contingencies means to you as a potential buyer. For example, if you waive your inspection contingency, that means that even if you have an inspection, you aren’t able to walk away from the deal because you don’t like what the inspection turns up. Similarly, an appraisal contingency means that if the home doesn’t appraise for the full value of your bid, you’re willing to cover the gap rather than walk away from the property. Not every home that looks like a great place is actually as good as it looks, so definitely think long and hard about how much money you’re willing to put into a home before you make these sorts of offers.
Wait until inspection to ask for seller’s credits.
One way to begin to recoup some of the money you might be overpaying on list price with your offer is to wait until inspection to ask for a seller’s credit. While some people choose to ask for the seller to fix the problem themselves before they move in as a buyer, conventional wisdom is to work with a contractor you trust so you know that the job gets done right. So, if a problem with the HVAC condenser turns up, consider asking for a $1,000 credit from the seller so that you can address that problem with a local company, like Direct AC, who you know will do the job right. While you obviously can’t lower the purchase price a considerable amount through a laundry list of seller’s credits, even getting a few here and there can make an important dent in the overall price you pay.
While it’s a tough market, it’s not impossible to get a home today. If you’re really serious about becoming a homeowner, take a look at the above strategies and talk to your realtor about what might work for you.
