Single-family and multigenerational homes are seeing a massive surge of interest as families are spending far more time together at home. Now that they’re using their homes for work, daycare, school, exercise and even date nights, Americans just want more space.
But despite the almost-overnight demand for larger homes, we can’t help but wonder whether this trend will reverse-course once a vaccine is widely distributed. As people flee low-square-footage condos, a market opportunity has presented itself for the optimistic buyers who want to live in walkable, dense urban environments that condos can provide.
The attached condominium market is the only market segment experiencing balance. Although not quite yet considered a buyer’s market, condos are sitting on the MLS longer and for lower prices than the detached market.
The National Association of Realtors (NAR) reports the 2020 national average months’ supply for all existing single-family home sales is 3 months, while condos have 4.2 months’ supply. Average home price increases in 2020 versus the prior year were 10.7 percent percent, while condos were 4.6 percent.
In Denver, Colorado, the Denver Metro Association of Realtors December 2020 market trends data for November shows the attached market experienced a decrease of $3.92 price per square foot year over year — the first price decrease since 2017 in the attached market — with a 6.3 months’ supply of inventory.
In fact, Realtor magazine reported in December of 2020 that homebuyers “are turning to condos for the sake of affordability when up against the high prices of single-family homes.”
We can only speculate whether this is a seasonal change, a product of living in a pandemic or a greater trend away from the condo lifestyle. But we can be certain that condos provide the greatest opportunity for buyers now and into the foreseeable future in terms of discounted prices, availability and opportunity to negotiate.
As hyper-competition for single-family homes pushes potential buyers out of the market, agents should be asking their clients to consider condos whose sellers are willing to negotiate.
Unlike the mad rush to submit offers within hours of posting for single-family homes, condo buyers can take their time considering favorites, evaluate neighborhoods, nearby amenities and ask more from sellers. Here are a few negotiation tips agents can present to clients to maximize their purchase:
1. Evaluate the seller’s position
Understand the seller’s situation. A few telltale hints of a weak seller position is extended time on the market and price reductions. Learn what the seller’s needs are before entering negotiations.
Sellers are far more likely to negotiate in the winter season because they might need to move for personal or professional reasons, and are perhaps more willing to make concessions to secure a buyer.
2. Manage the financials
Mortgage preapprovals are essential before placing an offer, as is saving enough for at least a 3 percent down payment. A preapproval shows the seller you’re a serious buyer and can move very quickly if interested, increasing the buyers’ standing to act in negotiations.
Inspections are fantastic opportunities for your clients to learn about the space and also identify non-statutorily required inspection negotiables.
Condo inspections can uncover water damage, furnace problems, unpleasant smells and mold issues. Sellers are far more likely to negotiate over non-cosmetic issues like furnace problems, flooring issues, minor water damage and more.
4. Calculate potential costs for repairs
Use the inspector’s report to estimate how much it will cost your buyers to repair the home if they purchase it. While sellers may not deduct the full estimated amount from the purchase price, your ask is far more likely to be taken seriously with third-party credibility.
Be somewhat conservative with the estimated costs to build trust with the seller and their agent so that your ask is more palatable.
4. Move to close
If your buyer clients and the seller are within a reasonable range of price, don’t force the price and risk all the work and goodwill you’ve created. Instead, negotiate closing costs and nonfixed items like furniture, appliances, hot tubs and more.
Remember, the final negotiated price including closing costs must add up to the appraisal or the lender won’t approve the loan — or your clients will need to bring more cash to closing.
Move quickly to grab a good deal. Although today’s condo market is favorable to buyers, but there will always be demand for top condo properties, and we have no idea what 2021 will bring to the real estate market. Be sure to advise your buyer clients to be preapproved for a mortgage and ready to negotiate.