In today’s housing market, overpaying for a home is unfortunately easy to do. Since 2020, homebuyers have faced challenging market conditions. Record low mortgage rates and the desire for more living space as we began to transition to working from home have brought more and more buyers into the market.
The combination of these factors have increased demand to buy homes, as well as the prices of homes. Bidding wars between competing buyers have become the norm, leading many to put down offers way beyond the home’s actual value or listed price. Over one-third (36%) of buyers who bought a home in the past two years believe they overpaid.
While it is likely homebuyers will pay more for a home than they have in the past, there are ways to avoid paying unnecessary amounts of money. If you’re looking to be a savvy home shopper, here’s how to avoid overpaying in today’s housing market.
Assess the Competitiveness of the Market
While bidding wars have become much more common in recent years, the competition for homes isn’t always the in different markets. That is why it is so important to assess the competitiveness of the local market to get an idea of the buyer scene and what might be influencing demand. With home prices high and mortgage rates increasing, many markets have slowed down since the start of the 2020 buying frenzy. Less buyers in the market makes things a lot easier for buyers trying to avoid intense bidding wars.
In these areas, buyers have less pressure to be aggressive and can make more reasonable offers. Acquiring as much information about the local housing market, as well as the specific property, will give you a good understanding of the flexibility you have. Look at home comps and research the neighborhood surrounding the homes you are interested in buying. Your real estate agent can help you with this. With this information, you can approach the market in the best possible way for you and your finances.
Don’t Feel Pressured to Pay Over Asking
Just because offering over asking price has become the norm doesn’t mean you should feel pressured to follow the trend. Over the past two years, sellers were pricing their home’s well above their home’s recommended list price in an attempt to take advantage of the demand and dare buyers to make higher offers.
Since then, the market has slowed down and sellers have become a bit more realistic. Many sellers nowadays are learning the hard way as they have to make significant price reductions in order to bring offers to the table. When you look at listings, ask yourself: “Is this home worth the amount of money it’s listed at?”. Work with your real estate agent and put an offer down that is competitive yet reasonable. You might be surprised to get your offer accepted.
Avoid Settling For a Home for the Sake of Buying
With demand high and inventory low, many buyers in the height of the homebuying surge were purchasing homes just for the sake of securing any home. Many of these buyers ended up paying way over asking price for a home that doesn’t even fit their needs. Luckily, more inventory is coming to the market with inventory currently up 17% from last year.
More inventory is likely to balance out the market, slow down home price growth and increase the time on the market. Unless you are in a rush to buy, take your time to scope out the local market and take the time to evaluate new listings. With an increase in new inventory hitting the market, you might find what you’re looking for in a home without having to overpay.
Work With a Low Commission Brokerage
Working with an agent is key to any successful real estate transaction. As a buyer, you want to consult with an agent to make sure you are putting in an offer that is in your best financial interests. This is especially important if you want to avoid overpaying on a home. Buyers who want to get the most money out of the real estate agent experience should consider working with a low-commission brokerage.
Low-commission brokerages offer a unique pricing model that typically offers discounted commission/listing fee for sellers and a buyer refund for buyers. Simple Showing rewards its buyers with a commission refund of up to 50% at closing (half of the typical 3% commission, or 1.5% of the purchase price). That's an average of $5,000. Of course, this is all without compromising on traditional real estate services including:
- Dedicated real estate agent
- No fees or obligations
- Instant online tour scheduling
- Help with inspections, repairs and more
- Contract and negotiation support
The housing market may be challenging, but these tips will hopefully help you avoid overpaying. If you’re ready to start your home buying journey, contact us to connect with a low-commission agent. Our SimpleShowing team can help you not only avoid overpaying in today’s housing market, but also help you save a little extra money on the side!
