For years, low inventory in most housing markets has given sellers the upper hand in negotiating with buyers, but 2019 has shown us buyer’s market signals a few times so far, including this week with 4 new buyer’s market signals from Redfin.
Let’s review them one at a time. Spoiler alert, the third one is the strongest signal.
FIRST, buyers who waived inspection contingencies in their successful home purchase offers are down 5.2% since last year (grey line on chart below).
This means more buyers than last year are telling sellers they require a licensed home inspector to come scour the home inside and out and write a full report with photos for them to study before they’re willing to close on the purchase deal. The offer is “contingent” on an inspection report acceptable to the buyer.
In a seller’s market, sellers often decline offers with inspection contingencies because bidding wars make sellers more likely to receive an offer that waives the inspection contingency.
More seller-accepted offers with inspection contingencies signals buyers getting upper hand in negotiating.
SECOND, buyers who waived financing contingencies in their successful home purchase offers are down 1.5% since last year (red line on chart below).
This means more buyers (albeit just a few more) than last year are telling sellers they require final loan approval before they’re willing to close.
Most buyer offers come in with a pre-approval letter, but sellers think offers with financing contingencies are weaker because mortgage pre-approval doesn’t mean a mortgage is final approved—lenders can find last minute deal-killers with buyer or property profiles.
And if the seller gets their way with buyer waiving financing contingency and the loan falls apart, the seller can have a claim to the buyer’s deposit.
So when we see more seller-accepted offers with financing contingencies, it signals buyers getting the upper hand.
But 1.5% since last year isn’t a super strong signal, plus you can see the more recent 2019 up-trend in waived financing contingencies.
THIRD, buyers who made their successful offer contingent on first needing to sell their existing home are up 4% since last year (see chart below) and the 8.5% peak hit this April was the highest since Redfin started recording this stat.
Normally sale contingencies are a non-starter for sellers because it’s a huge ask for a buyer to say “let me sell this home I’ve got first before I close on buying yours.”
The seller has no idea when that might happen, so if they accept an offer with this sale contingency in it, this is a strong buyer’s market signal.
FOURTH, Redfin also released their latest data on bidding wars this week, which are also a good indicator of how competitive it is out there for buyers.
The dotted red line in chart below shows national bidding wars in 2019 are down materially from 2017 and 2018. Only 14% of accepted Redfin offers had multiple offers.
WHAT DOES ALL THIS MEAN FOR YOU?
It means a few things:
– Sellers aren’t dominating like they were in recent years.
– You have more bargaining power as a buyer
– You can protect yourself against hiccups in the homebuying process by using contingencies in your contracts—something that’s been more difficult for many years.
This data is from the two Redfin reports linked below based on their brokerage activity, so while this isn’t all sale data nationally, Redfin serves the whole U.S. so it does give us good broader market signals.
That said, all real estate is hyper local, each offer you make is different, and you’ll write offers custom to each property and seller situation.
Your local real estate agent and lender will advise on a home by home basis.
Happy house hunting, and hit us with any questions.