Buying Tactics in Changing Markets.

Real Estate Agent with Wes Sanders Realty

Buying Tactics in Changing Markets

Over the last three decades, the real estate industry has seen unprecedented growth and profitability. Rates of home appreciation have been on a steady incline, resulting in many highly competitive housing markets. In many areas throughout the country, prospective homebuyers have been obliged to spend more, settle for less, or risk losing out on the housing hunt altogether.

Gradually, the market is beginning to show signs of changing. While certain areas remain highly active, national benchmarks such as rate of appreciation, average days on market and housing inventory indicate that real estate overall is edging towards a more balanced landscape. Homebuyers savvy enough to match their approach to the realities of today's market are more likely to find success.

Gauge Your Market Carefully

Identifying whether your market is "hot" or "cooling" is crucial when planning your home buying strategy. To do so, you must first properly define what your buying market is. In real estate, market is defined not only by geographical area but also by things like target price range and property type. For example, sales of high end single family homes in your most coveted neighborhood might be at a standstill while condo sales may be at an all time high.

With your market established, begin researching recent conditions. Are properties selling fast, or are they lingering on the market for months at a time? Are listings selling above, at, or below asking price? How often are buyers receiving multiple bids? How common are price reductions? How do local trends in the lat month or two compare to trends in the six months previous? Often the best way to get a read on such factors is with a professionally prepared Comparative Market Analysis.

Things to Avoid

If your market is in fact showing signs of softening, don't count on future appreciation when making an offer on a home. In hot markets many buyers overpay based on the theory that rapid appreciation will soon cover the additional investment, but this is an inadvisable tactic if appreciation rates are slowing. By the same token, future increase in a home's value should not be counted on to cover the cost of necessary repairs.

One common buyer's tactic in hot markets is to waive the home inspection as means of sweetening the deal for the seller. This kind of buyer risk is unnecessary in balanced markets. Another popular strategy, the use of "no cost" mortgages (mortgages that defer up-front costs at the expense of higher interest rates), is also inadvisable. With interest rates edging slightly higher than in the past, there is generally more advantage in paying the "points" now rather than adding on to the mortgage interest rate, particularly if you're buying for the long term.

Home Search Tactics

Watch Older Listings - Homes that have lingered on the market for months can indicate sellers who are beginning to feel nervous. As a result, you may be able to find a home for less or afford a larger home than you thought possible if you keep an eye on "old" properties. Consider making an offer below listing offer on a home that has been on the market for sometime. A beleaguered seller may be more than willing to negotiate.

Look for Price Reductions - Buyers tend to instinctively focus on listings new to the marketplace, ignoring changes in previous listings. This is a mistake in high inventory, slowing markets as price reductions tend to be much more common. Pay attention to desirable homes that may be "just" outside of your price range - they may drop in price and fall right into your lap.


The true shift in power in a more balanced marketplace will be felt in the negotiation process. While previous years have been marked by the multiple offer bidding war, more reasonable markets are characterized by rounds of offers and counteroffers. Two things to consider:

Remain Patient with Sellers - Many sellers may resist the notion that the market is any less favorable to their position. If an offer you've made on a property is rejected, do not assume that you must make a higher offer to avoid losing the property. If given time, the seller may realize that the offer you've made is very reasonable given the current status of the market.

React to Counteroffers - Counteroffers, even if substantially higher than your original offer, indicate a seller's willingness to negotiate. In slower markets buyers should feel more free to respond to counter offers with figures just above or even identical to the original offer made.



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