If you’re planning on buying or selling an investment property, having a handle on market conditions is critical. Can you expect a bidding war? Do you need to pay in all cash to win? What concessions might you need to make for buyers?
There’s no way to answer all these questions with certainty, but a new survey from Opendoor does offer some insights.
Here’s what to keep in mind as you prepare for buying or selling a property in the current market.
Buyers are Prepared to be Competitive
The vast majority of buyers expect to see a bidding war when they go to purchase a home. Millennials and Gen Z, in particular, see bidding wars in their future at rates of 76% and 73%, respectively. Baby Boomers are the least likely to expect big competition when buying a home.
Still, that doesn’t mean you can price your property extravagantly. Nearly 70% of buyers say homes are currently unreasonably priced, and 72% say affordability is their biggest concern when buying a house. So much so that a whopping 73% of buyers intend to bid below asking price. Intent to under-bid is highest with Baby Boomers and Gen Xers.
“Baby Boomer buyers are hunting for deals,” wrote Amita Amora, Opendoor’s vice president of investments. “Some 80% say they intend to make an offer on a home at or below the asking price, and only 14% are willing to make an offer above.”
Speed and Certainty Matters Most to Sellers
If you’re buying a property, offering speed and certainty to the seller can give you the upper hand. Nearly nine in 10 sellers say the certainty of an offer not falling through is “extremely” important to them, and another 58% say cash offers are important.
“With many buyers facing financing challenges and searching for a better deal, the rate of contract cancellations has increased significantly,” Amora wrote. “Today, 18% of home sales fall through—the second-highest percentage since 2014.”
About three in four sellers are looking to sell their home as quickly as possible, so getting preapproved for your mortgage, having your documentation ready, and being quick with inspections and repair requests can help (cash offers can help even more, though).
Finally, be choosy about any demands in negotiation. Sellers are most willing to negotiate on their closing date and asking price, and 42% are willing to cover inspection fees. They’re not as amenable to paying for home warranties, helping with closing costs, or offering repair credits.
Buyers and sellers aren’t exactly aligned in today’s market, and that can make it challenging on both sides of the transaction. If you’re on the selling side, be reasonable about your list price and be willing to negotiate. Don’t expect tons of over-asking bids, and with older buyers, be prepared to play hardball. Baby Boomers aren’t nearly as likely to expect a bidding war or bid over asking price.
If you’re in the market to buy a new property, make sure your offers are as clean as possible. Have your ducks in a row financially (or come with a cash offer), and be careful what you ask for in negotiations. Some concessions are more likely than others.
As Amora wrote, “The good news is that both prospective sellers (76%) and buyers (80%) indicate a willingness to make concessions to expedite their process.”
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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.