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If you’re in the market for a new home, it’s important to understand the changing landscape of the housing market. In the past few years, prices have shot up and inventory levels have dwindled, giving sellers the upper hand in negotiations. But this year, the market is starting to shift in favor of buyers.
With prices rising at a slower rate and more homes coming onto the market, buyers are regaining some of their negotiating power. Here’s what you need to know about the current state of the housing market and how to negotiate the best deal possible on your next home.
The Return of Contingencies
One of the biggest changes buyers are seeing in the housing market is the return of contingencies. In a hot market, many sellers are unwilling to accept an offer with any contingencies, such as a home inspection, financing or appraisal. But as the market cools, sellers are becoming more open to these types of offers.
The latest data is available from the National Association of Realtors, NAR. You’ve undoubtedly heard numerous tales of homebuyers giving up their inspection and appraisal contingency in recent years. Increasing the closing costs for many homebuyers. This trend is now on the decline. In NAR’s most recent study, it was shown that:
- 95% of sellers reported buyers requested a home inspection
- 67% of sellers negotiated with buyers on repairs as a result of the inspection findings
Currently, buyers are more financially capable of including an inspection contingency in their offers and negotiating as necessary based on the outcome of the inspection.
Sellers Are More Willing to Help with Closing Costs
In the past few years, sellers have been reluctant to help with buyers’ closing costs. But as the market has shifted in favor of buyers, sellers are becoming more open to negotiation on this front. Closing costs are generally between 2% and 5% of the property’s purchase price. Before the pandemic, it was commonplace for sellers to agree to pay some of the buyer’s closing costs as an incentive. This didn’t happen as frequently during the past two years when buyers were fiercely competing for properties.
According to the latest data from Realtor.com, 32% of sellers paid some or all of their buyer’s closing costs. Furthermore, there is evidence that purchasers have more room to negotiate. Realtor.com also reveals, 92% of all recent sellers accepted some buyer-friendly terms. Those included:
- 41% Accepted some contingencies in the contract (appraisal, home inspection, home sale, financing, etc.)
- 32% Dropped the price because the home didn’t meet appraisal
- 32% Paid for some or all of the buyer’s closing costs
- 30% Had to be flexible on the ideal timeline for closing
- 29% Paid for repairs to the home after the appraisal
- 28% Were not able to rent the home back after close despite asking to
These are all signs that sellers are becoming more willing to negotiate on terms as the market shifts in favor of buyers. Keep in mind that your lender may impose restrictions on closing cost credits, which might differ by state and loan type. Be sure to talk with your loan advisor to see how much of the closing costs a seller is able contribute in order save you some money.
If you’re considering buying a home in the near future, it’s important to understand the current state of the housing market. Prices are still rising, but at a slower rate than in recent years. And more homes are coming onto the market, giving buyers more options and negotiating power.
Be sure to watch for our upcoming videos to stay current with market updates and to learn more valuable tips!