The American housing market is definitely changing. Maybe not everywhere, at least not yet. But in most places, sellers are slowly losing their dominance and buyers are taking control.
The evidence is strong: Instances of multiple offers on the same property have fallen drastically, more buyers are holding out for home inspections, and more deals come with caveats about the buyers selling their current homes.
According to realty brokerage firm Redfin, just 12 percent of all offers made through the company in June faced a bidding war. That’s down from 52 percent just a year ago – one in eight versus one in two.
Contingent Offers Up
Meanwhile, buyers are becoming more successful with contingent offers.
A year ago, according to Redfin, 20 percent of the company’s buyer-clients were willing to waive the contract contingency that allowed them to have a private home inspector go over the property from stem to stern before closing. Only 15 percent chose to forgo that language in May.
Home-sale contingencies also are on the rise. Redfin says 8.4 percent of successful offers submitted by its agents included such language in May – down a tick from 8.5 percent in April, but double the 4.4 percent from a year ago.
These buyer-protecting contingencies are included in typical home purchase agreements. By waiving them, the buyer gives more control and assurance to the seller. An increase in keeping these contingencies is an indication that buyers are moving into the driver’s seat.
Redfin Chief Economist Daryl Fairweather’s conclusion: Sellers are now more willing to give buyers what they want because sellers don’t have as much negotiating power as they did a year ago.
Houses are still selling, of course. But it’s taking longer than it used to, according to data from the National Association of Realtors. The average number of days on the market in May was 47, which is 22 days longer than in August 2017.
Days-on-the-market is a key indicator of the strength of local conditions. And since the first of the year, it has been steadily rising. Unfortunately, some houses linger longer – sometimes much longer – which means sellers have to take a hard look at their listings if they are serious.
Time on Market Hurts
There may be other reasons your house isn’t selling: Maybe it shows poorly. Perhaps houses comparable to yours are selling for less than what you are seeking. Or you might be keeping would-be buyers at bay by limiting your showing hours.
But “99.9 percent of the time,” said California agent Thomas Nelson, “it is price, and it needs to be reduced.”
There’s no shame in lowering your price. According to Zillow, nearly one in eight sellers does so. But many don’t bite the bullet quickly enough.
A survey by Shelterforce Weekly, a community development publication, found that a third of all sellers said they would wait at least 90 days, and almost another third would hold out for longer than that. But that isn’t soon enough.
Nelson said he’d pull the trigger by the third weekend, if the house has drawn no interest. Fellow California agent Michelle Carr Crowe would make a move after 30 days. And agents Mary Hutchison of Missouri and John Wiley of Florida would lower the price after just two weeks.
Data from NAR’s 2018 Profile of Buyers and Sellers reinforces these opinions. “The longer a home is on the market, the greater the discount from the listing price,” it found.
Places on the market for two weeks or less typically nailed 100 percent or more of their asking price, according to the report. Houses on the market for 17 weeks or more generally received 94 percent of their asking price.
When Is a Price Cut Needed?
You’ll know a price reduction is necessary if no one has come to look at your home, or if you’re getting lots of action, but no offers. Also consider a reduction if other homes like yours are priced for less, if you are receiving lots of negative feedback, or if you’re only getting offers substantially below your asking price.
There’s no rule of thumb about how much to cut your price. You should consult with your agent, consider any feedback you’ve been given, take a fresh look at the sales comps and proceed from there.
“You don’t set the sales price, the market does,” said agent Marti Steele Kilby, of California.
Whatever you do, though, make that first price reduction count. One reduction can attract buyers looking for a bargain, as long as you drop it enough to be competitive, said Massachusetts agent Bill Gassett. But more than that could be the kiss of death.
“Multiple price reductions will start to make your home undesirable,” he said. “[Reductions] will usually draw even further negative attention, leading buyers to assume there must be something seriously wrong with your home.”
According to NAR, 18 percent of sellers lower their price more than once, with a few lowering it as many as four times before accepting an offer.
Nelson said every home sells, even the dogs, if they are priced right. But experts agree: Pricing your house right in the first place is the best policy.
Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at email@example.com.