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Homebuying ‘Rules’ You’ve Heard Lately — and Should Actually Break

It’s been a mad, mad world the past few years, and that very much includes the real estate market. But the times, they are a changin’—yet again. And the good news for potential homebuyers is that the “anything goes” rules of the COVID-19 pandemic housing market frenzy are lifting. While we have yet to reach homeostasis—where buyers and sellers have equal power—there are signs of a more balanced real estate exchange.

While higher interest rates mean some potential buyers will find themselves unable to qualify for a mortgage, this cooling demand benefits the buyers who are still out there, giving them more options—and a little more negotiating power. Granted, exactly how much power buyers have will vary by location—certain stubbornly hot markets will remain a struggle. But the prevailing winds are blowing a bit more in favor of buyers these days. As such, many of the crazy rules you were hearing (and likely following) during the past two years of real estate pandemonium no longer apply.

To help you reset for this new world, here are some of the pandemic-era real estate rules that are now OK to break.

1. ‘If you love a house, you have to make an offer immediately’

During the pandemic, if you hesitated on a house, someone else would very well scoop it up on the spot. Today, however, there may be a little more time to think before you make an offer.® Chief Economist Danielle Hale agrees, saying that homes are taking longer to sell this year than last. (Listings currently linger 50 days—7 days longer than a year earlier.)

“In general, you likely have more time to make an offer, although that’s certainly not a guarantee,” says Hale. “If you’re on the fence about a home or its asking price doesn’t quite fit your budget, you might want to keep an eye on it, and if it doesn’t sell right away, you may have some room to negotiate with the seller.”

2. ‘Prepare to pay way over the asking price’

One agent's clients were eyeing a home listed for $1,100,000—though their budget was $1,000,000. While lowballing by $100,000 would have been laughable a year earlier, the agent knew it could work today, so they gave it a try.

This story proves that buyers no longer need to pay over the list price to get the house. In fact, data shows that the share of homes with price cuts has reached nearly 20% today, up from 11% a year earlier.

“With the housing market shifting, it’s really not necessary to go all in on a home in an effort to win the bid, unless it’s in an area that is still hot,” says Jason Gelios, real estate agent with Community Choice Realty in Southeast Michigan and author of “Think Like a Realtor.” “In fact, currently I have more buyers offering less than the asking price because there aren’t many buyers.”

3. ‘Once you’re pre-approved for a mortgage, you’ll know what you can afford’

During the pandemic, interest rates were at historic lows. So when people got pre-approved for a mortgage, they could probably assume it would hold once they found a home they wanted to buy. Today, however, the wild volatility of mortgage rates means that what homebuyers could afford to buy could vary from one week to the next. As a result, Hale recommends regularly “stress-testing” your budget by running the numbers on a wide range of possible mortgage interest rates so that you can be prepared no matter what happens.

“Recent mortgage rates have been moving up and down enough to impact home shopping budgets in a big way,” says Hale.

In other words, pre-approval is no guarantee; make sure to check again at current interest rates before making an offer that is within your financial reach.

4. ‘Waiving contingencies is worth the risk to get the house’

During the peak of COVID-19, many homebuyers were waiving contingencies left and right. From forgoing home inspections to adding appraisal waivers, buyers were putting themselves in a risky position just to win a bid on a home. Contingencies not only protect homebuyers, but can also bolster their borrowing power.

Tan Tunador, a senior loan officer with Atlantic Coast Mortgage, in Loudon County, VA, recently worked with a couple who couldn’t qualify for a mortgage without selling their current home.

“I asked them why they didn’t make their offer contingent upon the sale of their home, and they had no idea that they could even do that today,” says Tunador.

The couple submitted a new offer with the home sale contingency, which was enough to get the deal done.

5. ‘Don’t dare ask a seller for concessions’

During the pandemic, asking a seller for concessions probably meant losing the deal. But now that mortgage rates have topped 6%, asking for a little financial help is no longer verboten.

“The pandemic rule was ‘do what the seller wants.’ But now, more and more buyers are asking for price concessions, closing cost assistance, and scenarios buying the interest rate down,” says Tunador. “In the DC metro area, we are seeing homes sit on the market longer and buyers not being afraid to ask for concessions or price discounts.”

6. ‘You’ll need 20% down on a conventional loan’

High down payments were one of the ways potential homebuyers won competitive bids during the pandemic. That left some extremely qualified buyers who were being more conservative with their funds in a tough spot. Fortunately, today’s homebuyers don’t need to take such extreme measures to prove their worth to sellers.