Smart Moves

As the real estate market hurtles toward a new normal, there are major differences in outlook between buyers and sellers that are slowing the pace of transactions.

“Whenever the market changes, it’s really hard to put deals together,” says Glenn Kelman, the CEO of Redfin, the national realty firm.

Some sellers watching macroeconomic reports are focused on next year, when they anticipate that high property prices might slip. In contrast, sellers are focused on last year’s sales.

“Sellers remember that house down the street that sold for a song just four to eight months ago,” Kelman says.

While purchasers aren’t enjoying a bona fide buyer’s market, the situation is definitely becoming more buyer friendly in some ways. One positive is that since the worst of the pandemic, the number of available properties has greatly increased.

“Today’s shoppers can celebrate the fact that they have many more homes to consider than last year’s shoppers did,” says George Ratiu, economic research manager at Realtor.com, the home listing company.

Still, one of the negatives facing buyers these days is the increasing cost of home finance.

“Higher mortgage rates continue to take a toll on buyer purchasing power, despite all-time highs in rent prices, which continue to motivate some shoppers,” Ratiu says.

Sellers who lack awareness of the pressures affecting buyers can hurt themselves if they overprice a property for current market realities, says Mary Bazargan, a listing agent based in Washington, D.C.

“When we price a new listing conservatively, we’re getting multiple offers, and these homes are often selling above list price. But if we push the price aggressively high, the home tends to sit on the market for a while,” Bazargan says.

Eric Tyson, a personal finance expert, agrees that those who attempt to test the market with too high a price typically attract fewer prospects.

“Buyers who shop with an agent usually shop with a top pricing point in mind. They won’t see properties above that pricing ceiling. So, overpriced houses aren’t always on their radar,” says Tyson, the co-author of “House Selling for Dummies.”

Moreover, due to internet sleuthing, buyers are increasingly savvy about property valuations. Many are annoyed by the appearance of greed on the part of sellers and refuse to negotiate with those who ask too much.

“Remember that Americans don’t like to haggle. So don’t count on buyers engaging with you in multiple rounds of negotiation,” Tyson says.

Here are a few other pointers for sellers:

-- Look into local valuations before engaging a listing agent.

Sid Davis, a Utah-based real estate broker, notes there are now numerous websites that offer free and instantaneous assessments of home values. One of the best known is zillow.com.

It’s unrealistic to look to such “fast-pricing” sites for a definitive answer on the current worth of your place. After all, they typically rely heavily on publicly available data on recent home transactions. And some jurisdictions restrict or delay the release of such statistics. Still, such sites can sometimes give you a fair estimate.

“At least they’ll help you get into the right ballpark on the current value of your house. This gives you a starting point for a pricing discussion with the agents you interview,” says Davis, the author of “A Survival Guide to Selling a Home.”

Another way to gain a feel for prevailing prices before you hire an agent is to attend open houses.

Besides a sense of pricing realities in your neighborhood," you can also get a preliminary comparison on the condition of your home versus rival properties,” Davis says.

-- Consider multiple agents before picking one.

Interview at least three agents working in your area and don’t pick one who relies on hunches.

“Ask each agent for an honest evaluation of both the condition of your place and its present value. Make sure each agent shows you the comparable sales they used to make their price recommendation,” Tyson says.

To determine if an agent is truly active in your neighborhood, he suggests you ask for an “activity list” of all the properties the person has listed there during the prior six to 12 months.

-- Research each candidate’s track record on pricing.

These days, many sellers don’t receive their full asking price at the closing table. But if their property was marked accurately from the outset, they should come fairly close.

To assess an agent’s pricing recommendations, look at a few key numbers that reflect their track record. If the agent is routinely making accurate price recommendations, there should be relatively little disparity between the original list price and the final closing price.

“Sellers shouldn’t have to knock down their price just to get their property sold. In most cases, their home should sell for no less than 5% under the asking price,” Davis says.

He suggests you ask prospective listing agents to show you list-to-sale numbers for all the homes they’ve sold during the last 90 days.

-- Don’t let your ego affect your pricing.

Some people assume listing agents are motivated to price low with an eye to quick sales. But Davis says the greater risk is that occasional agents will recommend too high a price in hopes of flattering you into working with them.

Overpricing can even hurt owners in an area with few homes on the market.

“It doesn’t matter if you’re selling in a neighborhood that’s hot, cold or lukewarm. Asking way too much can easily kill your chances for a fast and successful sale,” Davis says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)

The pandemic had just reached the U.S. in 2020 when a couple in their mid-30s -- with dreams of raising a family --decided it was time to scout out a family-friendly neighborhood. They found a choice area but got caught up in a bidding war to buy a small gray bungalow with tiny bedrooms and bathrooms.

Two years and two babies later, the couple -- an RN and an IT manager -- already feel squeezed in the 1,900-square-foot house. So early this summer, they put the bungalow up for sale. Now they aspire to trade up to a bigger house in the same area.

“We still love the neighborhood, but we’re extremely disappointed in the response to our listing. The bidding wars that came with the pandemic are gone. Demand has plummeted. Sad to say, we haven’t received a single offer,” the RN laments.

The couple who bought the gray bungalow is not alone in experiencing second thoughts about their pandemic-era purchase. According to an extensive survey of buyers done for Clever Real Estate, a nationwide brokerage, 72% of pandemic-period purchasers have regrets. Fully 30% believe they paid too much, including many who bid over the asking price.

Stacy Berman, a veteran real estate agent, doesn’t know the couple who bought the gray bungalow, but she has a few words of advice for those who resisted buying during COVID and still wish to become homeowners.

“With the market more balanced between buyers and sellers, it’s actually a great time to buy. The frenzy is behind us, and there are more properties sitting unsold in an increasing number of neighborhoods. This makes it an excellent time to negotiate with sellers who are impatient to move,” says Berman, who’s sold homes since 2003.

Still, she cautions against the assumption that real estate values will fall steeply in the near future, given that many young adults are still in the household formation stage and wish to leave their rental apartments. Certainly, property prices are rising more slowly than in the recent past. But they’re still 18% higher than during the same period last year, according to the CoreLogic Case-Shiller Index.

“Some owners are cutting their list prices. But they have no intention of giving their houses away. So forget bottom shopping,” says Berman, who encourages buyers to move forward cautiously.

Here are a few pointers for buyers determined to avoid regrets:

-- Develop a “mission statement” for your ideal lifestyle.

Doro Kiley, a certified life coach, recommends that couples planning a home purchase write down their respective visions of a dream house -- including both location and home features. They should then share their visions, combining the key elements of both into a single statement.

“In my work I come across it all the time: Husbands and wives who start with different visions. Maybe she’s focused on a traditional colonial with a picket fence and lots of bedrooms for the grandchildren. But he wants a more contemporary house, like a mid-century-modern place with a big garage,” Kiley says.

Merrill Ottwein, a real estate broker and former president of the National Association of Exclusive Buyer Agents (naeba.org), suggests that homebuying couples try to resolve their differences by distinguishing between “wants” and “needs.”

-- Ponder the implications of a lengthy commute.

During the pandemic, when remote work was still an option for many professional workers, more buyers opted to live far from their workplaces. But now that more employees are being called back to the office, the trade-offs of a long commute are more wrenching.

As Ottwein says, one of the most difficult trade-offs many families face is between a larger, newer house with a longer commute and a smaller, older place that’s closer to a city center and the workplace of the primary wage earner.

Buyers who consider an outer-tier suburb are often driven by the desire for a larger property or what they perceive to be better schools.

“Unfortunately, good schools often correlate with newer suburbs rather than older areas that are close in,” Ottwein says.

But before you opt for a distant suburb, he strongly recommends you do morning and afternoon rush-hour test drives. This way, you’ll know more precisely what sort of traffic to expect if you buy there.

-- Factor in the demands of a large yard.

Many people with young children hang on tightly to the hope that their kids will have a large backyard where they can play. This aspiration can influence them to pick an outlying suburb at the expense of their convenience and commuting time.

But are the trade-offs necessary to acquire a large piece of land always worth it? Not necessarily, says Ottwein, noting that these days children often spend much more time in organized athletic and recreational activities than did their parents.

“With the pandemic largely over, many kids are again programmed to the hilt with sports, music lessons and school events. They have little time for the sort of free backyard play their folks remember so nostalgically from childhood,” he says.

There are only a few buyers whom Ottwein believes make as much use of their large lots as they expect when they first buy the place.

“Mostly it’s just those few people who want horses -- or are true isolationists -- who make enough use of a large piece of land to justify all the sacrifices of living far from their jobs,” he says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)

There’s abundant evidence the real estate market is now going through massive change -- a reality acknowledged by leading housing experts.

“We’re witnessing a housing recession in terms of declining home sales and home building,” says Lawrence Yun, chief economist for the National Association of Realtors (nar.realtor).

But, as Yun notes, not all current real estate market trends are favorable for potential buyers. That’s because the inventory of available homes remains tight, and prices are lingering in the unaffordable range.

“Nearly 40% of homes are still commanding the full list price,” Yun notes.

Even so, many wannabe homeowners are breathing a sigh of relief because at least there are now fewer ferocious bidding wars.

“I wouldn’t say it’s a buyer’s market. But we’re not seeing the crazy 15 to 20 offers for a house that we saw last year. At most, we’re seeing two or three offers,” says Rich Harty, a Chicago-area real estate broker who works solely with purchasers.

These days, potential buyers seem to fall into two groups. One is excited at the idea of making a first home purchase in the current market and has no intention of backing off. The other is also anxious to buy, but more fearful of overpaying.

“For folks who really want to buy, I see no point in sitting out the current market and potentially missing the chance for that ‘perfect fit’ house,” says Harty, a past president of the National Association of Exclusive Buyer Agents (naeba.org).

“Whether you’re more attracted to buying in this changing market or repulsed by it has a lot to do with your personality type,” says Eric Tyson, a personal finance expert and author of “Let’s Get Real About Money!”

Renters who are eager to buy are typically optimists, while those waiting on the sidelines are often pessimistic about the economy and the potential for near-term opportunities in the housing sector.

After they’ve analyzed the overall situation, however, Tyson says even pessimists usually see the positives in buying a well-chosen property now rather than continuing to rent indefinitely.

“Renting year after year has its own risks. Obviously, rental costs could continue to rise substantially in the years ahead. And in the future, those who keep renting will be precluded from the kind of home value appreciation homeowners have enjoyed through the decades,” Tyson says.

There’s no such thing as a risk-free home purchase. However, you can improve your odds of a successful outcome if you think strategically. Here are a few pointers:

-- Conduct some economic research of your own.

As good as they are, national real estate forecasts are of less value to buyers than is information that helps them assess the area where they’d like to live.

To locate the parts of your metropolitan area that have the best prospects for appreciation, start with a regional map. On this, pinpoint major employers, such as corporate headquarters and military bases, where jobs are expanding. Locate communities with top public schools. Also, identify areas served by popular public transit lines, including light rail systems.

-- Think through your “personal economy” before deciding what to buy.

Would buying a well-priced home in a strong neighborhood be a good financial bet for your household if your monthly mortgage payments are more than you can afford? Absolutely not, Tyson says.

Despite tight mortgage lending standards, he says it’s still possible for many buyers to qualify for a larger mortgage than their finances warrant, thereby placing them at risk of a future default. That’s because your lender knows less about your financial obligations and spending habits than do you.

“A lot of your decision on how expensive a house to buy should hinge on your personal financial situation and job prospects,” Tyson says.

Before committing to any purchase, it’s always wise to review your budget and assess your level of employment security. Despite the country’s low unemployment rate, is your current job at risk? Do you have easily marketable skills that would allow you to quickly get another job if you had to?

-- Request statistics on property values prior to bidding.

Researching relative property values before you put an offer on a home is critically important.

“In a dynamic market, you and your agent should search for similar homes that have sold very recently, ideally within the last three months,” Harty says.

But data on comparable sales won’t give you the whole story. These days, you also need numbers to track the direction of the market -- whether prices are heading up, down or sideways. Ask your agent to give you data on the median price of a home sold this past month versus the month prior. Also ask for median price comparisons on an annual and yearly basis. These statistics should give you a good feel for the trend.

Use this information when crafting a bid for a property you like. If selling prices are moderating in your target market, you can be more assertive with your opening bid. Also, you may not need to waive your right to a home inspection, as many people did during last year’s bidding wars.

“In every market, there are highly motivated sellers -- people who absolutely must move for whatever reason. As a buyer, it’s now reasonable to expect motivated sellers to prove more accommodating to your needs,” Harty says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)