In today’s real estate market, buyers shouldn’t shop for a home with the expectation they’ll be able to negotiate a lower sales price. In a typical housing market, buyers try to determine how much less than the asking price they can offer and still get the home. From there, the buyer and seller typically negotiate and agree on a revised price somewhere in the middle.
Things Are Different Today
Today’s housing market is anything but normal. According to the National Association of Realtors (NAR), homes today are:
- Receiving an average of 3.8 offers (more in Middle TN)
- Selling in just 17 days (faster in Middle TN)
Homes selling quickly and receiving multiple offers highlights how competitive the housing market is right now. This is due, in large part, to the low supply of homes for sale. Low supply and high demand mean homes often sell for more than the asking price. In some cases, they sell for a lot more. Selma Hepp, Deputy Chief Economist at CoreLogic, explains how these stats can impact buyers:
“The imbalance between robust demand and dismal availability of for-sale homes has led to a continual bidding over asking prices, which reached record levels in recent months. Now, almost 6 in 10 homes listed are selling over the asking price.”
Depending on the Price Point, You May Need To Rethink How You Look at a Home’s Asking Price
What does that mean for you? If you’ve found your dream home, you need to be realistic about today’s housing market and how that impacts the offer you’ll make. Offering below or even at a home’s asking price may not cut it. In today’s market, the highest bidder often wins the home, much like at an auction.
Currently, the asking price is often the floor of the negotiation rather than the ceiling. If you really love a home, it may ultimately sell for more than the sellers are asking. That’s important to keep in mind as you work with your agent to craft an offer.
Understand An Appraisal Gap Can Happen
Because of today’s home price appreciation and the auction-like atmosphere in the selling process in some price points, appraisal gaps – the gap between the price of your contract and the appraisal for the house – are more frequent. We have a preferred lender who can help you make up that gap with very little out of pocket. Reach out if you would like us to connect you.
According to data from CoreLogic:
“Beginning in January 2020, nationally, 7% of purchase transactions had a contract price above the appraisal, but by May 2021, the frequency had increased to 19% of purchase transactions.”
When this happens, your lender typically doesn't loan more than the home’s appraised value, and the seller may ask you to make up the difference out of pocket. However, our preferred lender has a program called Appraisal Gap Strategy that can help. Let us connect you with a lender who can help you understand what this looks like for you.
Bottom Line
Buyers need to be educated on how to look at the asking price of a home. Reach out to Team Fraker.... let's sit down and set some expectations and talk about what strong offers look like in your price point BEFORE you fall in love with a home!