Sacramento Real Estate Blog

In Sacramento and elsewhere, we’ve entered what we like to call a “Buyer’s Market”. Of course, what we mean by that is that relatively high inventory and falling prices favor the buyer. Buyers are more in control of the transaction now. They know it. Their agents know it (or they should). Sellers wish they didn’t know it, but based on falling list prices, I expect they know more than they let on.

In such a market, it’s easy (at least in principle) for buyers to find (or create) many opportunities to get a good buy on a house they really want. The reason, of course, is that you’re competing with fewer buyers. Still, we sometimes find buyers shopping in such a way that they might not take the best advantage of the situation. So here are our tips to turn an overall “buyers’ market” into one that really benefits that one buyer you’re really interested in — YOU!

1. Decide when the time is right for you to make your move. This sounds simple, but we see both buyers and sellers at all times doing what I call “market timing”. Should I sell now or wait until Summer? Should I buy now, or wait for prices to drop some more? What happens if I buy now and I lose some equity? I’ve always advised people that the best time to do something is whatever time is right for them. For a seller, that often means once they’ve got time for the inconvenience of getting their home ready and the hassle of moving. For a buyer, it boils down to finding a good buy on a house you love and a price that’s within your budget. One problem with market timing is that sometimes price and interest move opposite one another (we gave an example of this recently). One of the interesting things about this blog is that I’ve met all kinds of folks who are expecting prices to drop like they did historically, but nobody seems to remember a time when interest rates were awful.
2. Prepare your financing. (Speaking of interest). Oh, do we still have to do that now that we’re in control? Yes, you do, and here’s why: You’re not going to be offering full price. So you want your home sold (if you have to do that first), and you want to be preapproved for financing.
3. Take an active role when you do decide you’re ready to shop. When you are ready to shop, be comfortable in the driver’s seat. Your job now is to work with your agent to find the bargains. Your agent should be comfortable doing custom searches for you, to narrow down the homes in inventory that are already at or below “the comps”, i.e., the sold price for similar homes. The bargain you’re waiting for may already be there, with a desperate seller who’s just waiting for you to come to their rescue. Don’t even waste your time looking at the homes at the higher end of the price range. (The market will educate these sellers eventually as well, but their buyers will be shopping six months from now.)

   Once you’ve pre-selected homes that are already in the bargain range, take a look at days on market, and ask your agent to call the listing agent to inquire about the seller’s motivation on two to three of your favorites. (By rights, a listing agent isn’t supposed to represent that the seller will take less, but often you can get some useful information, especially if the seller’s starting to get a little desperate). When you have as much information as you can get, write your first offer.

   Remember those two or three homes you picked out? That’s because you’re not going to be writing full price offers, so your sellers may say no, or they might counter at a price that’s unacceptable to you. Always remember, buyers market or not: a counter-offer is the same as a rejection, and you can walk away if you wish (or you can accept, or counter again). Your total expense? You had to write a deposit check that wasn’t cashed, and for your first offer, you had to invest about 90 minutes of your time to go over the offer with your agent. (And by the way, it takes a lot less time to do your second and third offers, because even a careful agent like me isn’t going to walk you through all the paperwork every time — we’ll just go over what changed from one offer to the next.)

4. Don’t be afraid to walk away. Part of the reason buyers don’t always get the best bargain is that they fall very much in love with the house they’re buying. Of course, on the other hand, you don’t want to move into a house you don’t like, so you need to strike a balance here. This is where your preparation and your selection of multiple choices may help you.
5. Remember that the bargains are still the bargains. OK, now I’m going to partially contradict what I said above. This is a hard concept to explain, but what I mean by this is that even in a buyer’s market, there’s still likely to be heavy competition on the “sweet” end of the inventory. (There may be two hundred more tomatoes in a supermarket than anyone is reasonably going to buy today but that doesn’t mean you might not find your hand reaching for the same big red one as someone else in the store.) Nothing’s been more frustrating for me as an agent than talking up how much power buyers have now to my buyers, only to have them wait and have the house they want sold out from under them. (Again, picking out more than one ultimate choice is a wise precaution, but realistically, people often get their heart set on one model).
6. Think about what you really want. Most folks I’ve met (some investors being an exception), really want to find something they want and feel like they’ve made a “good bargain”. Of course, there are always those that see themselves as a sort of cross between Gary Busey and Donald Trump, and aren’t content unless someone on the other side gets a beating. In the sellers market, it was usually sellers who behaved like this, and sometimes they lost out. Often now that the market is turned we see buyers acting the same way, and sometimes losing out as well. In the long run the smartest buyer I ever met was the one who found a great buy and was able to bump another contingent offer with a contingent offer of his own, by doing something utterly unprecedented in any market: putting oneself in the other person’s shoes. If you want to play lowball, that’s a way to go, too, however. Now’s the time for it — what it boils down to is how much time you have and how much you favor a bargain on paper over the precise home your looking for.