Seller-concession opportunities

First-time homebuyers can benefit in the cooling housing market

Colorado’s housing market is finally beginning to cool off. For many sellers, gone are the days when they can expect a dozen cash offers for their home, at a price above what they’ve listed it for.

What does this mean for a potential homebuyer? Is it a good time to buy? Is it a bad time to buy? How does this type of market differ from what we’ve seen over the last decade? For the purposes of this article, let’s explore some of the opportunities and risks for first-time homebuyers.

The advantages in a cooling housing market are plentiful for first-time homebuyers, who often have the income to qualify but lack the assets to put toward the down payment and closing costs.

A cooling housing market means that a homeowner may have a more difficult time selling their home. This means that sellers are often more willing to negotiate with homebuyers to get the deal done, and this includes an increased willingness to provide seller concessions.

A homebuyer who requests that the seller cover the closing costs is more likely to have an offer accepted in this environment. That means that the amount of cash the buyer needs to have on hand can be greatly reduced. 

For example, let’s say that Kelly is a first-time homebuyer who has saved $30,000 to use for a down payment on her new home. Kelly found a home that she loves for $600,000, but she only has enough funds to cover the down payment on the home; she doesn’t have enough money to cover the closing costs too, which are estimated to be $6,500. 

In this example, Kelly may be able to put in a full-price offer on the home with a request that the seller cover the $6,500 in closing costs for her. In the last decade, Kelly’s offer would have been unlikely to result in a purchase in the housing market. But now the “seller’s market” trends have changed. 

Now that we’ve explored the opportunities facing first-time homebuyers in this cooling housing market, let’s explore risks. While it may be “easier” to purchase a home in this market, there is also an increased risk of overpaying for a home. One glance at any real estate listing website will make clear that many sellers are having to reduce their home prices to attract buyers. 

When you see home prices dropping, that indicates that appreciation levels are likely dropping and, in some cases, home values may drop. This doesn’t mean that it’s a bad time to purchase your first home, it simply means that it’s increasingly important to purchase a home at the right price. 

In addition to the risk of overpaying for the home, home buyers also need to be realistic about how quickly their home will appreciate. It is unlikely that they will see the double-digit appreciation figures we’ve seen in the recent past, and that could leave some homebuyers disappointed if they were expecting their home to become a “cash cow” overnight.

The current market conditions present some timely opportunities for first-time homebuyers who have been struggling to find a home to purchase in the last few years. However, it’s important to approach the process with a level head and do your research when selecting both a real estate agent and mortgage lender, to ensure the best and highest outcome with your offer, negotiations and the terms of your transaction and mortgage.

The Alpine Bank mortgage team keeps up-to-date with local real estate market conditions and financing options; contact a lender today for a complimentary consultation.

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