In Austin, Texas real estate it is clearly a buyers market right now. But buyers can still make mistakes that cost them an ideal experience when purchasing.
Last week our team came up with this list as the primary mistakes we think buyers make in a buyer’s market.
If you master these 10 things you will make the most of the opportunities that the market is giving you.
Getting overwhelmed by the number of options when inventory is high - there is a process to make this easier.
There are a lot of options for buyers right now. It is important to think about purchasing a home in a methodical manner otherwise the options can become overwhelming.
Start with all the MLS data and then apply logical criteria to eliminate homes.
3+ beds and 2+ garage spaces eliminate all homes smaller than three beds and with less than two garage spaces.
Price, location, school, size, and age are the most common selections our clients make. Start there and see what the data tells you!
Fixating on getting a discount from the list price rather than ascertaining fair value compared to the market, can distract from a potentially great deal.
The asking price is only as useful as the listing agent's ability to price and the seller's desire to sell. It is not a number buyers should anchor to.
This past year, we saw situations where listing prices were far too high, and even if a buyer could purchase 5% under the listing price, it would have been too high.
We also saw situations where the listing price was too low, and the property received multiple offers. Markets are efficient; if something is a great deal, it still gets snatched up, even in a down market.
Ascertaining fair value can help focus on the property as compared to other recent sales.
Focusing on “winning” in a negotiation instead of winning long-term—the financial benefits of owning long-term far outweigh the $5,000 they are negotiating for in the moment.
We see this from time to time. I have received an offer of 10% under asking with every term in the buyer's favor. This buyer isn’t interested in purchasing. They are interested in inflicting pain on the sellers and “winning.”
How do we manage this market with our buyers? Think of your offer holistically. There are 20+ variables. Decide which ones you want to give to the seller in their favor to make it easier for them to give you a better price if that’s important to you.
For example, if you want to make a contingent offer, you may need to pay the market price. But if you are willing to drop your contingency, the seller may be more excited to accept something lower.
Starting their home search by looking at homes— That’s step 3, not step 1! Start by determining how much you want to spend monthly.
Looking at homes helps people daydream; we get it. It’s so much fun! However, it is important to approach the home search methodically so that the buyer isn’t stressed out.
Start by finding a realtor who is experienced in helping you make a purchase. They will have a list of lenders that will also give you a great experience.
Start the financial decision-making process of home purchasing by considering what you want your payment to be and how much money you have for a down payment. Once you decide these two details with the help of a lender, you are ready to shop!
Thinking that purchasing is a process of selection, it’s not. It’s a process of elimination.
When I engage a professional and have to make a decision in their domain, I ask them how I should make this decision. I ask this often with my architect and builder. There are different considerations in each domain. Cost, Cosmetic, technical, and dependencies are the issues that come up quite often when building.
When purchasing a home, it is important to focus on the process of elimination and keep your focus on your goals.
If your goal is to purchase so that you can stop paying rent and have an appreciating asset on the table (https://bit.ly/CashFlowAppreciation) hen focus on that and eliminate homes until you find one that you can not eliminate.
When you have a lot of options, if you think of this as a selection process, you can get bogged down and overwhelmed.
Trying to find the 100% perfect home
There is no such thing as a 100% perfect home. We find 70% perfect houses, we find 80% perfect houses, and then we make them our own.
It is important to realize this when many options are available in a softer market.
We can never optimize on all variables; we optimize instead on the greatest number of variables possible.
Getting mired down by the handyman items in an inspection report rather than focusing on the larger goals and context
Unless you are buying a brand new home, you should expect many small items on your inspection report.
Most of those handyman items will be in that same condition when you sell your home seven years later.
Focus on the larger ticket items and negotiate for what you can get rather than trying to “win” the negotiation. Keep your eye on the goal of finding a house that meets +/-80% of your needs.
Buying a home if they think they’ll need to sell in less than three years. Home buying is not for everyone!
Buying a home is not for everyone. Some people don’t know where their job will take them in the next few years.
Other people don’t like making repairs at all, and home maintenance items would overwhelm them.
Real estate is not meant to be a short-term investment. It is a forgiving investment over the long term.
No one knows what the short-term 2-3 year time frame will bring in the real estate or stock markets. You always want to be able to choose the market you sell into; you never want to be forced to sell due to life events like job transfers or job losses.
Thinking they need to make a contingent offer if they have a home to sell, buyers need to consider all strategies. Recasting (re-amortizing) a mortgage is a great tool.
If you own a home and ar3e using the soft market to get into a more expensive home this is a great idea.
Selling a 500k home to purchase a 1M home gives you savings on 500K of your increased real estate position.
Many people think they need to make a contingent offer when they need to sell and buy. But remember that the seller takes your offer holistically, and a contingent offer is extremely short-term, so it will have to be very compelling in price.
Why not use the ability to re-cast your mortgage?
Recasting allows you to purchase the new home first, then when you sell your old home, take some or all of the net proceeds from the old home to pay down the principal in the new home and re-amortize the loan. The loan will keep the same maturity date, and the monthly payment will decrease based on the new principal amount.
Using a new realtor or part-time realtor to assist in a purchase. All realtors do not offer the same service. Research the right questions to ask.
Real estate consulting for buyers and sellers is a profession it is not a hobby, and it is not something that should be done part-time.
Working with someone who is full-time in real estate means they have access to the best trades, they know the best inspectors, and they are in touch with the latest due diligence issues, such as pool cancer, which came out of nowhere in 2023.
Realtors who work full-time can also give you and the other party a predictable outcome.
In a real estate transaction, there is goodwill between the buyer and seller; any negotiations take away from that goodwill. The goodwill is the purview of the principals to expend, not their realtors. Realtors should work collaboratively and professionally with one another to not expend their clients' goodwill. This also means a relator's incompetence should not be expending goodwill within the transaction.
Fixating on getting the bottom price of the market - did you buy S&P in March 2020? Neither did I. 😉
Did you buy S&P in March 2020? Neither did I. ;-)
With a modest 3% appreciation in 7 years, your home will be +/- 21% higher in price than it is now.
If you pay $765,000 instead of $750,000, that is 2% of the home value - you won’t remember that seven years later when you go to sell with $206,000 in equity appreciation.
We are delighted to be your guides to real estate and always happy to nerd out of the details with you.
Cheers,
Jen & the team
© 2024 Berbas Group. All rights reserved.
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