How to Find Value in Today's Real Estate Market

2021 spring market is a challenging one. The inventory is at its lowest ever and homes are selling for as much as hundreds of thousands over asking. There is no denying this is a tough time to buy, but that doesn’t mean it can’t be done and that there aren’t advantages as well. Interest rates although volatile are still at all-time lows, so even though the market is competitive and prices are rising your monthly mortgage payment will still be relatively low. Rates are expected to rise next year and what your payment is now could be 25% more expensive assuming prices only increase 10% and, in some areas, values are increasing at a 40% clip and have long eclipsed that 10% increase. Long story short, buyers still have strong buying power due to financing.

For many expanding families out there, do not despair! There are ways you can still find value in this market!

Here are 5 tips to help you do just that!

1. Work with a buyer’s agent!

I know this sounds self-serving but it’s more important than ever that buyers have an agent who is active in the market and is advocating for them. Many buyers are taking on unnecessary risk and not understanding the implications. Furthermore, the market is rising faster than the data, meaning recent sales are not indicative of future pricing. For example, let’s say there are three identical homes, one closed last week at $500,000, one is under agreement after being listed at $500,000 and one is new to the market listed at $500,000. The home that is under agreement might have accepted an offer at $550,000 which is a more accurate indication of pricing than the home that just sold but if you’re not active in the market in that area, you wouldn’t know that. If you want a chance of submitting a competitive bid, it’s vital to work with an agent who is an active participant in the market.

2. Focus on the bones of the house.

Many buyers are getting swept up by the homes that are decorated and designed to today’s latest style. These are the homes that are getting bid up to astronomical prices. If you want to have a competitive edge in this market it’s important to have an open mind. In the grand scheme of things, the most important elements of a home are its structure and layout. Everything else can be fixed and changed predictably. What kind of foundation does the home have? Is it a layout that you can work with? The most expensive part of a renovation is when you are changing the layout. When renovations are cosmetic only (paint, refacing cabinets, replacing countertops) is when costs are predictable and manageable. In my experience, most buyers do not use their imagination enough when looking at homes and miss opportunities to buy a home that is less expensive because they can’t see past its dated aesthetic.

3. Concentrate on homes that have been on the market longer than 2 weeks.

The person who has the most options is the person who has the most negotiating power. If you are one of thirty buyers bidding on a house, the seller holds all the cards. If the home hasn’t sold right away, it’s still important to act with urgency but we can actually negotiate in these situations versus succumbing to the sellers’ whims. Most homes haven’t sold right away because they are over priced and then buyers assume there is something wrong with them and refuse to see them. I cannot tell you how many opportunities are missed because of this mindset!!! If you want to find a “deal” or at least have some negotiating power, I strongly encourage you to focus on homes that are NOT new to the market!

4. Make it at least a 5-year home.

If you are buying in this market, it’s important that you plan to stay there for at least 5 years. A lot of homes are not appraising at the time of purchase, but are in a few months when the market data catches up to the market! No one can predict the future so the best way to hedge your bet is to plan to purchase a home where you can live there comfortably for at least 5 years.

5. Get clear on why you are buying and have conviction in your decisions.

You are going to kiss a lot of toads in this market meaning put in offers and not get them accepted. It’s inevitable so brace yourself! Real estate is about taking on calculated risk in order to achieve your goals. There are no winners and losers and there is no right or wrong. To not be discouraged focus on why you are buying! Is it the school district that is going to open up possibilities for your children’s future? Is it to be close to family? Is it to have that gorgeous entertaining space so you can host Thanksgiving for years to come? These are things that we can put a monetary value on and are what will make this a home and not just an investment. Honor your risk appetite and what the home value is to YOU not the market.

I have helped over 100 buyers find their perfect home – we lose some offers along the way – but EVERY SINGLE TIME when they find “the one” we are so grateful for the ones we lost along because it eventually brought us to the path of that perfect home. 

Need help finding the perfect home for your family? Get in touch with Ali today.