In the current seller’s market, the harsh reality is that buyers shouldn’t expect to be able to negotiate a lower sales price. Typically, in a normal 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 negotiate and meet somewhere in the middle. Unfortunately, things are different in today’s market.
According to the National Association of Realtors (NAR), homes today are receiving an average of 3.8 offers and selling in just 17 days. These statistics highlight just how competitive the housing market is right now due to the low supply of homes for sale.
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.”
This means you need to be realistic about today’s housing market and how that impacts the offer you’ll make in the current market. Offering below or even at a home’s asking price may not make the cut. In today’s market, buyers are entering bidding wars where the highest bidder often wins the home. You should consider the asking price as the floor of the negotiation rather than the ceiling in this situation. 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.
Additionally, because of home price appreciation and the auctions taking place throughout the selling process, appraisal gaps are more frequent. Appraisal gaps are the gap between the price of your contract and the appraisal for the house.
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 won’t loan you more than the home’s appraised value, and the seller may ask you to make up the difference out of pocket. Knowing your budget and what you can afford when navigating the housing market is key.
Bidding wars and today’s auction-like atmosphere mean buyers need to rethink how they look at the asking price of a home. Connect with an agent who can advise you on the current market and help you find your dream home.