Frustrated U.S. homebuyers are starting to see some slivers of sunlight on the residential real estate horizon.
According to industry data, the inventory of “for sale” homes is starting to creep upward, albeit ever-so-slowly. According to industry data, April U.S. home inventory had the slowest year-to-year slide since December 2019.
Even so, homebuyers find themselves in a familiar place, with their backs still firmly against the wall, as about half of all “for sale” homes are immersed in bidding wars.
A case in point: lacking leverage, homebuyers looking to close a deal in what remains a low inventory, highly-competitive housing market are being forced to give up concessions that have historically favored the buyer and not the seller.
That was then and this is now.
“Yes, homebuyer concessions are real,” said Tim Ossmo, chief executive officer at Suburban Jungle, a real estate advisory firm in Park Ridge, Ill., in comments to TheStreet.com. “Seemingly endless inventory issues and rising prices are pushing people into locations they may never have considered. Some of these purchases are all cash and sight unseen.”
Besides geographical convenience, more homebuyers are settling for neighborhood convenience and at a stiff price.
“You see it in areas like Tennessee and Georgia in the south, and Idaho, and Nevada out west,” Ossmo said. “In these hotspots, buying well over asking price is also common, and selecting the right neighborhood over the right house has become of greater importance in this new "remote world".
“Needless to say renovations have also climbed dramatically,” he added.
Other Concessions Are Stacking Up
Homebuyers are currently considering concessions their parents and even older siblings never experienced. In fact, some buyers are even paying for the seller to stay in the house for a while.
“Every homeowner needs to go somewhere, if they are currently living in their listed home,” Jon Lahey, owner and realtor at Fine Living Group at eXp, in Rockville, Md., told TheStreet.com. “Some buyers are asking if the seller needs time to rent the house back. There is a good chance a buyer will win a bidding war if they offer the seller 30 days free rent or a 60-day free rent back.”
Another tactic Lahey is seeing in his area is buyers offering to contribute more toward the transfer and record agent tax split. “That’s usually a 50/50 between buyer and seller. Some buyers are offering to pay the sellers part of the tax right now.”
Another big issue is conceding to bypass home inspections. That move, real estate experts say, is highly risky.
“Home inspections are crucial and that is one item I always advise buyers not to skip,” Christian Ross, managing broker for Atlanta-based Engel & Volkers, told TheStreet.com. “Have an inspector on standby. If available in your state, you can avoid a full inspection waiver by requesting a two-day due diligence period where you can get your inspection completed and terminate if it's too much work.”
“It’s better to spend $500 to find a large issue versus walking into a 30-year mortgage without a full understanding of the home and its potential challenges,” Ross noted.
Keep It Real, Homebuyer
Right now, major homebuyer concessions can include buying fixer-uppers, waving inspections, getting into bidding wars, and even buying homes that are off the beaten path.
With so many concessions in play, real estate specialists advise buyers to stay grounded and not get aggressively competitive.
“While making a concession can be a good way for buyers to find a place, it’s important that they don’t go overboard with what they’re willing to sacrifice,” LendingTree senior economic analyst Jacob Channel told TheStreet.com.
Homebuyers have to assess their situations and evaluate if it’s worth it to stand your ground, concession-wise.
“It really depends on the individual situation,” Mayer Dallal, managing director at mortgage lender MBANC, told TheStreet.com. “For example, if someone has been in the market for a long time and having trouble finding a home that checks all of their "must have" boxes, and suddenly that house appears, it might be worth it to make some concessions in order to get your dream house.”
Otherwise, homebuyers playing the long game and who aren’t getting too attached to any one house can avoid concessions -- hopefully sooner rather than later.
“It's difficult to create an across-the-board rule given that there are so many varying individual situations,” Dallas added. “But on the whole, those kinds of homebuyer concessions are becoming more commonplace.”
