The real estate market—and daily life—has been completely upended in just a few weeks. Yet maybe in spite of it all, you’ve managed to find a home you love and are ready to make an offer. Congratulations! But as you hover on the brink of what is potentially the biggest investment of your life, amid a global crisis, you may be feeling a fair amount of uncertainty.
We’re here to help you navigate this step with a new series, “Home Buying in the Age of Coronavirus.” Our third installment aims to help you answer the question: “How do I negotiate an offer right now?” It’ll also help you figure out how to get your offer to the closing table.
Here is everything you need to know about getting from offer to closing during the coronavirus pandemic.
How low can you go?
So how much can you lowball? Not as much as you would think.
“Banks have rolled out mortgage forbearance programs, so most sellers are not in immediate danger of losing their home, even if they just lost their job or their income has been significantly cut,” says Caleb Liu, who flips homes in Southern California with HouseSimplySold.com. “Other sellers have opted to pull their listings and wait for better market conditions, so inventory remains tight.”
On the other hand, a home seller who doesn’t have the luxury of time is facing a smaller buyer pool, due to stay-at-home orders and concerns about buying a home based on what may only amount to a virtual tour. So buyers could have the upper hand for a short time when it comes to homeowners who need to sell.
“Here in the Phoenix and Scottsdale region it’s still a very strong seller’s market with a low inventory of homes,” says Jo Ann Bauer, an agent with the Ozer Group Coldwell Banker Realty. “However, I think nervous sellers are going to be more open to price adjustments and negotiating with buyers, so there is room for buyers to be more aggressive in their offer price.”
Still, buyers should not assume that because we are in a pandemic they can automatically lowball a seller. Sellers may be more willing, however, to entertain offers on the lower end.
“While I’m not seeing lowball offers, I am seeing sellers—who may have held out for potential better offers if we were not in this crisis—quick to take offers they receive and get officially under contract,” adds Julia Henson, a real estate professional in Springfield, MO.
The only way to test a seller’s level of motivation is to make an offer, says John Grimes, an agent in Atlanta. But play it safe.
“Just remember that most sellers that don’t absolutely need to sell would rather not engage with a buyer that is seeking to take advantage of the situation,” says Grimes, who advises offering a modest discount of 3% to 5% below asking price to start a dialogue.
Be prepared for a longer closing
Ordinarily, once your offer is accepted, it’s a straight line to closing. In the age of coronavirus, that journey is more of a zigzag. That means buyers need to prepare for potential delays.
This is due to the health and safety concerns of appraisers, home inspectors, and repair contractors. They are adjusting their guidelines and availability, which can slow the transaction. (Many of these professionals are quickly adapting to doing their work remotely when possible.)
“Buyers may need to embrace a longer transaction process by setting the closing date out further than the typical 30 days,” advises Bauer.
She also recommends adding contingencies in the contract for the in-person viewing of the property.
“By anticipating a potential delay upfront and writing an extension into the contract, buyers can have a little more peace of mind in this uncertain time,” she says.
Ensure you have a mortgage commitment
Securing financing may be the biggest challenge right now, so make sure you have a mortgage commitment letter when you make an offer. This is a more detailed document than a pre-approval and, as the name implies, represents a firm commitment from your lender.
“Banks are issuing fewer loans in order to conserve cash to offset the imminent delinquencies,” says John Castle, an agent with Keller Williams Integrity Realty in Ottawa, Ontario. “Many buyers believe they have secured financing when, in reality, their lender may have only conditionally approved their loan.”
And many lenders are tightening up their terms and conditions. Minimum credit scores and required cash reserves have risen to new levels, making it difficult for many buyers to qualify.
Make sure your lender is staying on top of the fast-changing mortgage industry, says Nathan Claire, an agent at Momentum Realty in Jacksonville, FL.
“But as long as the buyer can qualify for whatever financing they are seeking to acquire, there shouldn’t be any issue with achieving a successful close,” Claire says.
Just don’t be afraid to over-communicate during this time.
“Make sure you touch base with your lender preferably every day, or at least every other day,” says Liu. “The credit markets are shifting rapidly.”
And if you have the funds, all-cash offers are even more desirable to sellers during this time, as they allow buyers to close on the home more quickly than an offer contingent on financing.
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