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The news comes at you fast these days and is often grim, but with schools back in session, the pandemic largely behind us, the Mariners heading for the playoffs and the Huskies in college football’s top 20, there’s plenty of good news to keep us from dwelling on minor inconveniences like inflation, interest rates, the stock market or the uncertain launch of the Geno Smith era.
It works the same way in the local real estate market (You knew I’d get there!) where a shifting market presents opportunities for both buyers and sellers who know where to look for them and what to do when they find one. Yes, prices are down from their peak back in April/May. That’s good news for buyers, but sellers take heart; the data says that if you sold your home today you would likely still get more for it than if you had sold it a year ago.
Factoid: August median sale prices across the Eastside were up 4% vs. August 2021 and in Seattle they were up 6%.
Lots of deals are still being done. Buyers are just operating more cautiously and taking advantage of the uptick in inventory and the slower (I’d say “more normal”) pace of the market by taking their time and considering all their options. Here are some thoughts on how both buyers and sellers can adjust their strategies to be successful in today’s shifting market.
Higher mortgage interest rates are limiting the buying power of many would-be buyers and putting target homes out of reach. Buyers looking to lower their rate – and payment – might consider an adjustable-rate mortgage (ARM).
Factoid: The interest rate on a 5/1 ARM is running about one point lower than the rate on a 30-year fixed rate mortgage.
The rate will adjust down the road, but with a 5/1 ARM the lower rate is locked in for 5 years so it could be an option worth discussing with your mortgage lender. Alternatively, if you are negotiating on purchase price (Yes, that’s a real thing these days!) asking the seller to pay points to buy down your interest rate in lieu of a price concession can be a win for both sides. I know some great local lenders who can help you understand all the financing options and choose the one that’s right for you. Let me know if you’d like an introduction.
Staying on the buying side, make sure you are working with a professional agent who knows your market and how to navigate it. For example, listings that have been on the market a while can present opportunities, but they need to be approached tactfully.
Factoid: Representing the buyers in two transactions over the past month we negotiated selling prices averaging 7% below the original asking prices.
When making a lower offer it’s often helpful to provide the listing agent with market data justifying your price. Presented properly, the data doesn’t just make the case for your offer but also provides the listing agent with much needed “ammo” to use when presenting the offer to the seller.
Finally on the buy side, though the market has shifted, tactics used successfully during the red-hot sellers’ market of the past few years can still come in handy. Use the extra time available in today’s market to do your own pre-inspection and have your lender get your application more fully pre-approved. Then, even if you’re not competing directly with other buyers, write an offer waiving financing and inspection contingencies and releasing a non-refundable deposit to the seller. There’s no risk to you if you’re sure that you are going to close the deal, and the stronger deal terms may make a lower selling price more palatable to the seller.
When selling, the first key to maximizing your return in this market is to price your listing correctly. They say, “hope is not a strategy” and the market is currently full of listings where sellers are clinging to pricing from last spring (or earlier) and hoping for a good outcome.
Factoid: Last month across the Eastside homes that sold in under 15 days sold for an average of 99.2% of their list price. Homes that sold after 61-90 days on the market sold for 84.3% of list price. In Seattle the numbers were 100% and 87.3%, respectively. It literally pays to get it right the first time!
When pricing a listing today, “comp” sales from 6 months ago can be meaningless and even sales that closed back in June or July can be wildly misleading since those deals were negotiated and went under contract back in April or May – all old news! The best way to approach pricing today is to look at currently active listings of similar size homes in your neighborhood. Have an agent take you to see them and then honestly assess where your home stacks up with the others in size, layout, condition, finishes, etc. Those listings will be your competition and if your house is not the best one in the bunch it shouldn’t be the highest priced, or your listing will sit.
Finally, sellers should be sure to choose an experienced agent who knows how to prepare and market their home for sale. Not having a solid plan, or cutting corners on prep, staging or marketing will drop your listing in the buyers’ rankings (see above) and cost you money in the long run. Remember, in today’s market it will likely be you who is competing with other listings, not buyers fighting it out to “win” your house.
I hope that helps. If you are considering a purchase or sale let’s talk about the plan to get the best outcome in your specific situation.
Operators are standing by…
Rip.
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