by Tami Bonnell, Co-Chair, EXIT Realty Corp. International
Throughout 2021, buyers and sellers have been in emotional overdrive as they navigate multiple offer situations time and again and they’ve often bought in a panic. We’ve seen offers over asking price and anxious buyers waiving appraisals and home inspections hoping to position their offer better in the eyes of the seller. They’ve offered on condos or townhouses when what they really wanted was a single-family home, just so they could own something.
People move because of their circumstances – they’re making more money, they’re making less money, they’re getting married, they’re getting divorced, they’re adding to their family, they’re empty-nesters, they’re relocating because of their job. Compounding those life changes, buying and selling real estate can be an emotional experience at the best of times, and 2021 hasn’t, in many cases, been the best of times. The market frenzy caused many people to buy property sight unseen, pay over asking price, and borrow money from parents or grandparents in order to shore up their down payment. As a result, I believe we’re going to see a lot of people experience an “Uh Oh” moment next year. They will see home prices settle, feel buyer’s remorse and say to themselves, “I can’t believe, I did that!”
In my opinion, in 2022 the market will settle down. We’ll see more inventory because people won’t be as fearful of the pandemic. We’ll see longer days on the market and we’re going to see prices level off. Seventy-two percent of landlords are small-time investors who have been carrying properties without their tenants paying rent. I believe some of them will divest themselves of these rental properties. The good news is, this will not only create a pocket for new investors, but it will also create a window of opportunity for first time home buyers who can come in with a little paper and paint.
And we’ll see the F word. Foreclosures. I don’t believe we’ll see anything as dire as we did in 2008, 2009 and 2010 when people were buying with riskier mortgages, but we will certainly see some short sales and foreclosures which will also have an impact on the average sales price going into next year.
So, what can the savvy real estate buyer and seller learn from 2021 to help make the most of the opportunities to be had in 2022? I believe that it makes sense for them to work with a real estate professional who understands the business and the market. Additionally, make a list of what they truly want – the non-negotiables – and stick to it. Draw a line in the sand to help eliminate options that don’t meet their criteria, so they don’t end up with “just anything”. In my opinion one should never waive a home inspection. There could be a something wrong with the property that could cost a tremendous amount of money, and cash-strapped first-time home buyers could be a water heater away from not being able to pay their mortgage. A home is a haven, but it is also an investment. People want the opportunity to build equity in their home, and that’s how, combined with social security and retirement benefits, many have ability to retire.
Many parents and grandparents who loaned or gifted money to their children to buy real estate in 2021, did so by drawing equity out of their own properties. It’s time to reassess their own financial position so ten years from now they’re not in dire straits because of a decision they made based on emotion.
In summary, in 2022 my advice to buyers and sellers is to shelve their emotions, make a list of non-negotiables and work with a professional whose knowledge and experience can help guide them on the right path to smart home ownership.