How to Negotiate More Effectively in the Current Home Market Sellers have leverage in this volatile economy.
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This year has surprisingly seen a strong housing market. Homeowners make monthly payments to the bank, and therefore you'd think the pandemic recession and job losses would lead to more property sellers.
However, that hasn't been the case. Low mortgage rates, low inventory supply and robust housing prices have led to a glut of buyers looking to acquire residential properties. Such an investment, whether personal or business, provides multiple benefits of long-term capital gains, tax advantages and monthly cash flow from renters.
Here are tips for selling a home in the current economic environment.
So what does a seller's market mean for people looking to put a household on the market? It means they're facing a robust real-estate sector and by liquidating now, homeowners can lock in an attractive price from multiple bidders.
Negotiating well requires doing homework. It's important to stay cooperative (instead of being antagonistic) and avoid taking discussions too personal. However, you likely possess leverage to push harder on price and critical terms that matter most to your family.
If you sense urgency from a buyer, that obviously works to your advantage, and more so if there are many bids. Does the interested party appear to love the property? Is it their "dream home"? Let the potential acquirer know there are many suitors for the house. Try to avoid concessions on inspection and closing costs, which can add up to 7-8 percent of the transaction value.
Work with an expert realtor
As realtors know, local conditions dictate housing inventory levels, availability, price, negotiating leverage and whether you can obtain favorable terms. In a seller's market, demand exceeds supply and that gives sellers a negotiating edge.
According to the National Association of Realtors, existing home sales in February 2020 were the strongest since 2007 at 5.77 million nationwide. In August, existing home sales climbed 2.4 percent, which marked three consecutive months of positive sales gains. The median sales price was up 11.4 percent year over year at $310,600.
I recently spoke with Brett Siegal, founder of Ruuster, a home-buying management platform. He says having an expert agent by your side is worth their commission. Agents frequently have access to housing inventory that may not be available online, they help you determine your home buying needs and priorities, they bring expertise and knowledge of your local market, and they serve as your sherpa throughout the home buying process, which can be quite complicated, especially for first-time buyers.
A property sale represents the biggest transaction most people will make in their lifetime. Don't rely on state-issued licenses. Instead, hire an agent who has at least 50 transactions under their belt.
"A good agent can be great for helping act as a buffer between the sellers and you during negotiations and can be your best confidant in the process," says Siegal. "For example, they can attend a home inspection and appraisal, and advise whether to negotiate seller credits or get a second appraisal if the appraised value is not what you were expecting — or whether what you've received seems reasonable."
Be willing to walk away
Finally, know your walk-away point. Typically, it will involve price. A buyer who wants to avoid paying closing-related costs makes them less attractive. Don't waste time on people who give unrealistic, low-ball offers, hoping they'll somehow come to their senses.
Show your property to other acquirers who deserve your attention. Since there are more buyers than sellers in the current market, find a purchaser who doesn't attach strings on a deal except a willingness to make an attractive and perhaps above-market offer. Understandably, most sellers like offers that are the least complicated.
A transaction is voluntary, and no one is obliged to accept a bad deal. Be willing to walk away by recognizing there are other purchasers. In many situations, you've got the upper hand. No deal is better than a regretful one.