How to Make a Deal in ANY Market

Will Prices Ever Drop?

This is a question that everyone has on their minds especially with the market cooling down over the summer of 2021. It's been a wild 18 months, and it's important to appreciate how crazy it's been for everyone. Double-digit appreciation on almost every property class; the prevalence of "clean offers" with a minimal amount of contingencies as a standard--people, this is crazy!

With that out of the way, the answer to this important question is that prices will most likely drop, but not in the way folks are expecting. For example, in Alexandria, VA, listing prices have dropped -13% year-over-year in September 2021. Someone might see this and say, "Look! Prices are dropping!" But wait--Alexandria has experienced between 11-16% appreciation over the last 18 months. A 13% drop actually brings the list price down to reasonable levels (DMV reasonable...which is still high).

But what is a more important question that I think can help whether prices drop or not, is, "How can I make a deal happen?" Basically, be a person who is prepared for any market.

How to Prepare for ANY Market

If you want to be ready for any market or are looking for a deal, you'll have to be more willing to create and stick to a structured plan. The three key areas are: Financials, Search Terms, and having a Team.

Be Clear on Your Financials

Most people start looking at homes online or open houses (or watching HGTV) long before they have a clear picture of what they can afford. That's normal. If you want to get a deal or be ready for every market, you have to know what your ceiling is.

Myth: you need 20% down to buy a house.

Most folks focus heavily on saving up for a down payment, so one thing you can do is allocate some of your down payment for repairs or different parts of the offer like an appraisal or a home inspection.

Have a financial picture with your credit score and the liquid assets you have available, whether they're yours or gifts, grants, etc. that you can secure elsewhere. Knowing this will put you in a position where you can identify the places you can put in competitive offers if you're looking in a hot neighborhood.

Know What You Want

Following the financial picture, you gotta be clear about what you want in a house. If you've watched any home renovation shows or real estate "reality TV," the truth is that your home search is not going to be idyllic. That doesn't mean it won't be fun, it just means that you'll probably see a lot of homes that don't have what you want.

That's why it's critical that you know:

1) what non-negotiable features do you need?

2) what upgrades do you like?

3) what upgrades you can make in the future?

4) what repairs are needed right now?

5) what repairs can be done in the future?

If you're looking for a deal, or you're competing, you may have to waive an inspection. You can still do an inspection, but you may not have the option to make your offer contingent on one. That means you may have to adopt some repairs if it's a house that is dated or whose systems are in need of replacement sooner rather than later.

Another key is asking yourself if you need an updated home. That may limit your options in terms of location, price, and the size of the property; but if the important thing for you is to get into a home now and "make it your own" over time, don't be shy to look at properties that are not updated or don't have all the bells and whistles.

Have a Solid Team

This is where a lot of people cut corners and inevitably self-sabotage their plan. Especially now when materials are super expensive, and delays are out of control. Some might think that, because prices are so high, they'll just go with the cheapest contractor they can find. Sometimes it's ok to cut costs, especially if you've front-loaded other bigger, more important projects; not everything has to be expensive!

Not everything has to be expensive!

But just beware that--as Dave Matthews sang--you pay for what you get. I've walked into homes where you could instantly tell when a seller hired a cheap contractor because the backsplash or vinyl planking or paint was so...bad. Like...really bad. They got a "discount," and paid more for their discount by having their home sit on the market longer than the competition.

You also want to work with a lender that can go the distance, and advisors who know your best interests, and know how to protect them as your transaction moves forward.

Work the Plan

What sometimes happens after coming up with a plan is anxiety that it was a lot of work for nothing. The property or properties you are targeting may not show up right away. It might take weeks, even months, to find what you're looking for. This last step is the most crucial: don't waver. Stay calm and filter any of your emotions, and properties you come across, through "your algorithm."

This does not mean that you won't get frustrated just because you have a plan. It does mean that you have a plan--and people--who will support you when your emotions try and take control of you. Regardless of what you pay for your house, it's probably one of the biggest investments you'll make, so taking adequate time to "find the deal" is normal.

So this is a simple outline of how to be ready in any market, whether it's hot, or a slow market, or a crash. The only variable you have to be flexible with is time, everything else will be accounted for.