The verdict is in — the old way of doing business is over. Join us at Inman Connect New York Jan. 23-25, when together we’ll conquer today’s market challenges and prepare for tomorrow’s opportunities. Defy the market and bet big on your future.
Compass agent Alex Platt can remember the not-so-distant past when he would list a house and find himself with multiple competing offers almost immediately, with many buyers offering to waive all contingencies to make their offer stand out.
But in the latter months of 2023, as mortgage rates have crept up to 8 percent at times, Platt, the principal agent of The Platt Group in Boca Raton and Delray Beach, Florida, has found those roles reversed, with sellers now pulling out the stops and offering multiple concessions to attract buyers.
Alex Platt. Image: Compass
“The market has definitely changed from a year ago when everybody was outbidding each other and you would waive any contingencies or concessions,” Platt told Inman. “Now it’s a buyer’s market and we do see sellers doing what it takes to get the deal together and done.”
Among the concessions Platt has seen buyers offer recently have been some as small as a $1 credit offered for a new vanity because the existing vanity’s door didn’t open properly and others as large as a section of wall being replaced due to water damage from a sprinkler.
Platt says he and his team have made sure to tell their seller clients to adjust their expectations when listing their homes and to be prepared to offer concessions in order to keep a deal alive.
“We make sure to prep our sellers and say ‘Hey, just so you know, it’s not going to sell as fast and, plus, buyers are expecting more perfection than they were in the past. So just be open-minded to doing a couple of repairs,’” he said.
Platt is hardly alone. A report released this month by Redfin found that homesellers working with Redfin agents gave concessions to buyers in 35 percent of all home sales that took place during the three-month period ending Oct. 31 — up considerably from just two years ago when mortgage rates were less than half what they currently are and only 27.6 percent of deals included concessions.
Redfin’s data categorizes anything that reduces the overall cost for a buyer as a concession, including money toward repairs, closing costs or mortgage rate buydowns.
The data paints a clear picture: Sellers are becoming more open to employing concessions as high mortgage rates stymie homebuying activity, a sharp reversal from the pandemic homebuying frenzy when fierce competition made concessions rare. Multiple agents tell Inman they feel they are firmly in a buyers’ market, even as buyers face high costs and low inventory.
Terry Hendricks. Image: RE/MAX
That’s certainly the case in the suburbs of Dallas. According to Terry Hendricks, an agent with RE/MAX DFW Associates in Frisco, Texas, it’s become common over the past few months for sellers to both knock a few thousand dollars off their asking price to attract buyers and offer any number of additional concessions to ensure deals go through.
“To get people through the door I’m seeing price reductions, and then once they like the home and they do a loan estimate with a lender, we’re seeing buyers making offers with concessions,” Hendricks said.
Hendricks described an overall shift to a more balanced market in the Dallas area where, even before their house is listed for sale, sellers are putting more work into its presentation than they may have in recent years past, and buyers are more particular than they would have been with regard to repairs.
“Homeowners are spending more money upfront to get their home ready for the market because buyers are becoming more picky. Buyers have a little more leverage in this market,” he said. “And under contract buyers are asking for more repairs than they were asking for maybe 18 months ago.”
Hendricks described most of the repairs he sees requested as cosmetic repairs.
Further south in Austin, Paul Reddam of Homesville Realty Group says he is seeing mostly financial concessions. Reddam says homes are closing for anywhere between 8 percent and 11 percent less than their original listing price, with many sellers offering rate buydowns as well, though he advises his buyer clients to take concessions on price rather than mortgage rates.
Paul Reddam. Image: Compass
“We’re coaching people: ‘Don’t buy down, take the money,’” he said. “This first loan that you’ll have right now, it’s a temporary loan. I’m expecting in two years rates will come down; hold your nose until then. There’s no reason to put a bunch of money into a loan you’re not going to keep.”
“It feels and acts like a real buyers market even though our inventory isn’t there,” he said. “I think if we’re constantly negotiating downward, that’s a buyer’s market. If we’re negotiating upwards, that’s a seller’s market.”
In New York City, one of the nation’s most expensive real estate markets, concessions are becoming more common as sellers try to move pricy inventory.
Brian Meier, executive director of luxury sales at Berkshire Hathaway HomeServices New York, said that most of the properties offering incentives in New York are those that have been taken off the market and re-listed, or have been sitting on the market for six months or more without any offers.
One property in particular, a townhouse in Brooklyn, stands out to Meier for the sheer amount of concessions it took to finally get sold. The seller offered to pay the full first year of mortgage payments upfront on the $1.369 million property and to buy down two mortgage rate points, which equals to a $110,000 concession, according to Meier’s math.
While concessions similar to this are common, Meier said that he suspects they are less effective than simply dropping the price of a property a few percentage points.
“I’m of the belief that we’re such an educated market that these types of market incentives that are becoming pretty common don’t work as well as just dropping the price $110,000,” Meier said. “I do think personally that buyers see it as a ploy, and a situation where the owner doesn’t want to drop the price 10 [percent] to 12 percent, so they’re doing an incentive, and I think it leaves the buyer feeling like they’re part of a ploy, a misdirection, and I don’t think they generally work.”
Brian Meier
Other agents said they consider concessions a sometimes-powerful tool for sellers, but only if applied with finesse.
“There is a delicate balance when it comes to offering concessions during a transaction,” Tyler Stallings, a partner and broker with Corcoran Urban Real Estate in Chicago said. “However, if done strategically, and with the help of an experienced agent, concessions can be a powerful offering for both sellers and buyers that ultimately lead to deals getting across the finish line.”
Meier, however, maintains that no strategy is more effective than just adjusting the price, in his market at least.
“The buyer realizes that the seller doesn’t want to price the property maybe where they should so they have to do that,” he said. “It reeks of desperation.”
