The housing market is finally tipping in favor of buyers, and that means they can walk away with more than just a decent deal on a home.
Around 42% of homes sold in the final three months of 2022 included some kind of concession from the seller, Redfin data found, up from just 30% the previous quarter. Those incentives included mortgage rate-buy downs, cash for closing costs and repairs, and warranties on household appliances. A separate study found that 13.6% of sellers also slashed their listing price to attract buyers.
For homebuyers, the uptick in concessions means the days of waiving contingencies and inspections are behind them and they’ll have more bargaining power when purchasing a home. But buyers should act fast, one expert said, as a potential increase in competition may dissuade sellers from negotiating in the long term.
“Everyone has different motivations and goals. Every market is different, but deals are to be had now,” Monte Miner, real estate agent at Ironwood Fine Properties, told Yahoo Finance.
Here’s what to ask for.
The days of waiving contingencies such as appraisals and forgoing inspections are fading into the rearview mirror. Still, contract activity remains slightly competitive depending on your location.
At least 24% of buyers waived the inspection contingency in December 2022, according to the National Association of Realtors confidence survey, up from 16% a month prior and 19% one year ago. An additional 24% of buyers waived an appraisal contingency in December, up slightly from 16% in November and 21% a year ago.
Home inspection contingencies are particularly important because it can let you know if there’s a deal-breaking issue with the property before a purchase occurs. It can also help you negotiate repairs with the seller, which is becoming increasingly common in today’s market.
“If buyers have this short window to buy where they can get incentives to purchase, [they] would rather buy where they have an opportunity to really think about it, get an inspection, a financing contingency and not feel rushed,” Jeff Reynolds, broker at Compass and founder of UrbanCondoSpaces.com, told Yahoo Finance.
When mortgage rates increased at their fastest clip in over 50 years last year, plenty of homebuyers still in the market opted for a mortgage rate buy-down to ease the financial burden on their home loan.
A buydown is often a strategic option some borrowers use to lower their interest rate by paying discount points at closing. Discount points, or mortgage points, are only paid once at closing and can reduce your interest rate for the life of your loan.
“When the rate was up in the high 7s, we were seeing a 2-1 buydown being asked for a lot,” Miner said. “When that happens, the buyer is hoping to refinance in the next two years in most cases. With rates [in 2023] potentially under 6%, I see that as a possible yet less likely scenario.”
Under some circumstances, a seller may even offer to pay points to offer a temporary rate buydown – only applicable for the first few months of your loan. This can make your mortgage payments more affordable in the beginning of your loan.
Reduce your closing costs
One of the big expenses buyer face when purchasing a home is paying off the closing costs. These fees can include charges for appraisers, home inspectors, real estate agents, attorneys and your lender to name a few.
According to Realtor.com, the closing costs on a home purchase often total 2% to 7% of the home’s purchase price. That means a buyer that purchased a home at the average listed price of $400,000 in December, may have faced a closing fee between $8,000 and $28,000.
Although home sellers and buyers generally split the costs of closing services and fees, these days sellers are more likely to offer to pay more or all of the closing costs to make a sale.
“One of the factors that made buyers pause last year was them saying ‘I don’t have enough money for closing costs,’” John Downs, senior vice president at Vellum Mortgage, told Yahoo Finance. “Well, actually sellers are now paying it for you.”
Ask for a price reduction
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