What Experts Say About Buying a Home Right Now
The real estate market has generated its fair share of headlines since the pandemic upended normal home-buying patterns. Would-be buyers have watched in horror as inventory has tightened and prices have skyrocketed, seemingly without end, wondering whether they’re better off waiting or jumping in before things get even crazier. Here’s what real estate experts have to say about the market right now, including what to do if you do take the plunge.
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If the insane seller’s market has kept you sidelined, experts say it might be a good time to dip a toe back in the water. “Compared to earlier this year, there’s more inventory on the market,” says Stephanie Minnich of the Falk Ruvin Gallagher Team in Milwaukee. “We are seeing days on market increasing in many neighborhoods,” she says. “Another change I’m seeing is the number of offers. Earlier this year, some homes were receiving 20-plus offers on the first day. Today, the number of first-day offers is much lower.” Plus, as summer draws to an end, sellers whose homes are still sitting may become more amenable to lowering their price. “If you can wait until you’re later into the fall months, you have a better chance of getting a deal,” says Ben Neely, president and owner of Riverbend Homes in Austin, Texas. “However, a ‘deal’ in this market may only be paying full asking price for a property, instead of having to overbid other competitive offers.”
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While the market might be getting slightly better for buyers, the keyword is “slightly,” experts emphasize. “We see no reason to believe there is a decrease in prices coming, as that would require some new supply of homes, and homes can't be built overnight,” says John Gluch, owner of Gluch Group in Phoenix. “The home-building industry is chronically understaffed and building supplies are in high demand and short supply. Demand is tempering some, but it would have to fall off a cliff to have any meaningful effect on pricing.” Gluch says he predicts that the market will remain hot for at least a couple more years.
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While casually keeping an eye out for a dream house may seem like a nice idea, the reality of today’s market means that, in practicality, it’s off-limits for all but the most committed homebuyers. “This market is not for ‘tire kickers,’ so to say,” says Jared James, strategic real estate adviser at Real Estate Bees. “It's for serious buyers that are willing to put more money down, offer more than they originally wanted to, waive their contingencies in many situations, and be flexible with what the seller's needs are. It's not a market for the faint of heart right now.”
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Would-be buyers also need to start their home search with the expectation that it will probably take longer than they like, experts emphasize. “Buyers need to have proper expectations that they will make many offers that should get accepted, but won't,” James says. “If they stay diligent and treat every offer like it's their first, eventually they will win the bid and get the house they want.”
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Would-be buyers can take comfort in the fact that mortgage rates continue to hover near record lows and are helping counteract the seller’s market. That means those who are willing to put down roots will especially benefit, says Bill Samuel of Blue Ladder Development in Chicago. “You will be paying much less in interest over the life of the loan” than if rates were higher, he emphasizes. “If you are planning on living in the same location for several more years and have an adequate emergency fund saved up, then buying a house now is a great tool to help you continue building wealth.”
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When competition is stiff, buyers can get a leg up by using an agent who can suss out opportunities in unexpected places. “Work with an agent who can find you off-market homes,” recommends Nick Deckard of eXp Realty in New Jersey. “The best values are found when there’s no competition. There are sellers out there who would sell but don’t want to deal with the hassles of listing, like home prep, staging, and being out of the house for showings. Work with an agent who has a system for finding them.” Cara Pearlman of The Cara Pearlman Group in Washington, D.C., says choosing an agent who is well-connected to others in the industry is critical, as it gives them a chance to scope out yet-to-be-listed properties. “If inventory seems dismal, having a good buyer's agent on your side will be more important than ever. They can tap into their colleagues’ listing pipelines and find out about homes that will be launched in September.”
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Today, buyers need to acknowledge that their dream home may end up looking a little different than what’s in their heads. To do so, they should distinguish between the things they can and can’t change. “What's outside the house matters as much as what's inside,” cautions Ryan Dibble, COO of real estate startup Flyhomes. “Nearly 1 in 5 homebuyers said they weren't happy with their home's location, which is the one thing you can't change about a home. Identify your dream neighborhood, then widen the circle. Take the time to explore every neighborhood you're considering in person. Think about your neighborhood must-haves, like good schools, walkability, or social life.” Dibble also recommends taking a long-term view of potential changes. “It's okay to be aware of things you'll likely want to change when you can, like a kitchen renovation or an extra bathroom. Prioritize the wish-list items you can't change, like the neighborhood or the amount of yard space.”
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One thing is clear: In this hot market, cash buyers have a massive leg up on the competition. “Sellers prefer cash offers because they close faster and eliminate the risk of the mortgage not getting funded,” Dibble says. “Cash offers give buyers much more negotiating power, helping them to save thousands on the transaction.” After cash buyers, buyers with conventional loans but high down payments are the next most desirable, Samuel says, and they in turn have an edge over buyers with FHA or VA financing. Why? These loans have stricter inspection and appraisal requirements that sellers have little incentive to accommodate right now.
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Assuming you’re not lucky enough to be able to plunk down a wad of cash for your desired abode — that’s most of us mere mortals — then having financing in order from the get-go is a must. “Presenting an offer in a way that clearly documents you are financially qualified to complete the purchase is absolutely critical,” Samuel says. “There is no chance you will win a bidding war without a preapproval attached to your offer.”
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Relatedly, if you’re the indecisive type, we have bad news: In this market, if you snooze, you lose. “If you really like the property, then you should sit down with your agent the same day to go through the comp research for one to two hours and work on putting together an offer,” Samuel says. “If you are interested in a property, you must act quickly or you risk losing it to another offer.”
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If you know you can comfortably spend up to, say, $500,000 on a new home, it makes sense to search for properties listed for up to that amount, right? Unfortunately, in this market, that can get you into financial trouble. “Prepare yourself to spend more than you expect,” Dibble says. “Nationwide, homes are going 20% or more over list price. Don't spend time looking at properties that will end up going for more than you budgeted for. As you're getting a sense of what you can afford, search well below your max so you can comfortably bid up.” In other words, you might want to cap that $500,000 search at $420,000, knowing there’s a good chance you could end up at the top of your budget when all is said and done.
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In a more traditional market, few buyers would consider removing contingencies such as inspections or appraisals. Alas, this isn’t a traditional market, and every contingency adds uncertainty for the seller — and makes your offer less attractive. Ryan Dalzell of San Diego-based Dalzell Group says buyers can feel a bit more confident about waiving an appraisal contingency, because “lenders and appraisers recognize the strength of this market and it’s rare that an appraisal does not match the offer price, especially in situations where there are multiple offers.” You may also gain an upper hand by being more flexible in less critical areas, Dibble says. “One example would be closing earlier and offering the seller a short rent-back to allow them an easier move into their next home.”
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If you find yourself in stiff competition for the home of your dreams, there’s little to lose by showing exactly how much you want it. “We recommend putting a story together for the seller,” says Alison Bernstein, founder and president of real estate firm Suburban Jungle. “The seller has a plethora of memories in the home and they will want it to go to good hands who will care for it and enjoy it. Adding personal notes explaining why you have selected the home and how you see a beautiful life ahead under that roof always sweetens the deal.”
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There will never be a shortage of folks prognosticating about the real estate market, and it can paralyze even the most well-intentioned of buyers. “Timing the market, just like the stock market, is a fool’s game,” Deckard says. Instead, he emphasizes the importance of long-term planning for anyone who remains on the fence. “They should talk with their agent ahead of time to talk through their plan for making offers as well as getting clear on their real estate goals.”
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