Buying a home is a major and often stressful life event, especially for first-time homebuyers. That stress is no doubt compounded by attempting to purchase a home during a global pandemic — but there are some silver linings. In some ways, the coronavirus crisis has led to some unique advantages for first-time homebuyers. If you are still financially able to buy a home during these times, these are the benefits you can take advantage of.
Last updated: June 5, 2020
Buyers and Brokers Are Less Aggressive Than Usual
The pandemic has caused people to slow down and rethink their approach to the homebuying process, said Rebecca Brooksher, an agent with Warburg Realty.
“Everyone has a new perspective, so you are less likely to find the pushy broker or the buyer who will overbid because it’s the perfect house,” she said. “Everyone is on their best behavior. People are grounded and know their priorities.”
There's Less Competition
“There are certainly prospective buyers who were actively scouring the market pre-pandemic that have now endured severe financial hardship, and may be forced to hold off on buying until they recoup funds that have been lost,” said Jeremy Kamm, an agent with Warburg Realty. “The demographic of first-time homebuyers has likely shrunken to a certain extent, and therefore there is that much less competition, i.e. room for opportunity.”
The Pandemic Is Turning the Tide From a Sellers' Market to a Buyers' Market
“It has been a sellers’ market for a while now — many sellers have sold their homes at top dollar, walking away with windfalls,” said Chantay Bridges, senior real estate specialist. “The pandemic levels the playing field.”
Sellers Have More Realistic Expectations
As competition shrinks and real estate inventory rises, homebuyers will have the upper hand.
“As inventory that appeals to these buyers begins to increase as restrictions are lifted and business resumes, those buyers that remain active and interested will hold much of the bargaining power,” Kamm said. “There will be opportunities for great deals to be made with sellers who understand the new environment that we are in, and are genuinely realistic about selling their homes.”
Sellers Could Be More Desperate To Sell
In addition to having more realistic expectations, some sellers may give great deals to new homebuyers out of desperation due to their own changed financial circumstances.
“First-time homebuyers may run into sellers that must sell to get their cash out,” said Brett Ringelheim, a licensed real estate salesperson with Compass. “In these scenarios, the buyer might be getting a better deal due to unforeseen circumstances that occurred in the seller’s life.”
Mortgages Rates Are at Record Lows
In late May, the average interest rate for a 30-year fixed-rate mortgage sank to 3.15%, the lowest recorded rate in nearly 50 years, The Washington Post reported.
“Record low interest rates can give the homebuyer an opportunity to lock in a very low rate for the next 30 years, as most mortgages are 30 years,” Ringelheim said.
Mortgage Lenders Will Be More Willing To Negotiate Terms
In addition to low mortgage rates, buyers may be able to get better loan terms due to the smaller pool of buyers.
“Lenders will be more likely to negotiate their fees and costs when issuing loans because there is a lower number of qualified buyers this year compared to others,” said real estate attorney Rajeh A. Saadeh.
First-Time Homebuyers Don't Need To Worry About Selling During a Pandemic
“First-time buyers don’t have the added challenge of needing to sell a home with all the extra precautions necessary at this time,” said Tory Keith, president of Board & Park Property Solutions.
This can give them a leg up over current homeowners who are in the market.
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First-Time Homebuyers Have More Flexibility To Work With Sellers
“The flexibility that many first-time buyers have with timing because they may be in a month-to-month or tenancy-at-will lease affords them the luxury of waiting for the perfect home, and they can make their offer more appealing to sellers who may require a specific closing date,” Keith said.
First-Time Homebuyers Have More Time To Make an Offer
“The pandemic is making it easier for first-time homebuyers to find the right house,” said John Castle, a realtor with Keller Williams. “First-time buyers often need more time to consider a property before buying it. Fortunately, COVID has slowed the market down. Simultaneous showings are forbidden, which means it takes more time to generate enough exposure to sell the property. This gives buyers more time to make their decision.”
Closing Is Happening More Quickly
“I am coming up on a closing for first-time buyers, and the main thing I have noticed is how quickly things were happening,” said Heather Gregory of Flagler Duval Real Estate. “My buyers had no delays. I also sold at the very beginning of the pandemic and everyone on board was very fast due to the unknown. We got a townhome closed in two weeks.”
Condo Prices Are Low
“The demand for short-term rentals has collapsed,” Castle said. “Consequently, a large number of condominium apartments have come on the market, and condominium prices in the most expensive cities are down substantially. First-time homebuyers can use this opportunity to find a great deal.”
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More Foreclosures Will Be Hitting the Market Soon
“Buyers can keep an eye on local foreclosures and bank REO properties, both of which should rise over the next year in the wake of the CARES Act foreclosure moratorium expiring,” said Brian Davis, real estate investor and co-founder at SparkRental.com.
Home Builders and Developers Could Offer Incentives in the Current Climate
“I’d encourage all first-time buyers to check with local home builders and developers,” said James McGrath, co-founder of the NYC real estate brokerage, Yoreevo. “These large operations need sales to keep their engine running, so even if they could sell for a bit more down the road, they may be offering incentives now which can make a big difference — especially on closing costs.”
Digital Marketing Has Made It Easier To Look At More Houses
“The surge in digital marketing for homes has made it much easier for a homebuyer to see if they like a home,” said Leo Young, a realtor with Coldwell Banker. “Many homes on the market now have extensive pictures, 3D virtual tours and video walkthroughs, so you can see almost every inch of a house without spending the time to drive back and forth or coordinate schedules.”
First-Time Homebuyers Will Be Able To Jump On Opportunities To Buy as Supply Increases
“More supply will be coming soon as sellers fears subside,” said Brandon Brown, broker/owner at BayBrook Realty. “This will give a short window of increased inventory that could bode well for first-time homebuyers who can jump in before those sellers complete their sales on their move-up home. I expect the market to thaw out a little as we approach summer.”
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Home Market Values Will Likely Increase After Purchase
“Lower interest rates have already been priced into the real estate market, and there is a forecasted drop in interest rates through 2021,” said Caleb Liu, owner of House Simply Sold. “Most home buyers are not aware of this and have not priced this into their buying decision. First-time buyers may be pleasantly surprised by a slight bump to their home’s market value after purchase, even in the face of a pandemic.”
Things First-Time Homebuyers Need To Keep in Mind
Although there are some benefits to buying a home now, that doesn’t mean there aren’t extra challenges that come with buying in the current real estate climate. Prospective homebuyers should keep these things in mind before moving forward with their plans to buy.
Mortgage Lenders Have Become More Selective About Whom They Approve
Although mortgage terms and rates may be more favorable for buyers, it’s now harder to get a mortgage.
“Lenders have become more restrictive around lending, so it may be more challenging to qualify,” said Phil Felice, CRO of Orchard, a tech-powered broker.
Prospective buyers should expect stricter documentation requirements and higher credit standards, The Seattle Times reported.
“But if you have good credit and a steady income, you can take advantage of very low rates,” Felice said.
First-Time Homebuying Assistance Programs May Be Less Available
Jeff McGuiness, chief sales officer of Embrace Home Loans in St. Louis, told The Seattle Times that down payment assistance programs that are tied to state and local government budgets may be less available because of financial pressure on governments caused by the pandemic.
In addition, “some banks are cutting back on their low down payment options,” he said.
There Is Still More Demand Than Supply
“The supply-demand imbalance in the housing market has been the case for years,” McGrath said. “The U.S. needs about 1.5 million new homes every year, and we’ve been building far less than that since the housing bubble popped. Before COVID-19, we were running at about 1.3 million and even less for the 10 years prior. With housing in such short supply, it’s hard to see prices falling much.”
The supply-demand imbalance has also been exacerbated by the pandemic, with many sellers taking their homes off the market for the time being.
“Normally this time of year you might have 40 or 50 houses to choose from, and now you only have four or five,” Brad Klimek, a Cleveland-based agent who specializes in first-time homebuyers, told HomeLight. “A lot of sellers are waiting for the virus to lift because they are scared for people to come into their home, even though realtors are taking every precaution.”
Although Gregory said that closing has been happening quickly, other stages of the buying process have been slowed down by the pandemic.
“It was harder to get in to see homes,” she said.
Preapprovals and inspections may also take longer than usual, according to HomeLight.
You Can't Time the Real Estate Market
“Recession or not, it’s impossible to time the market, whether for buying stock or buying real estate,” Roger Ma, a New York-based financial planner and owner of lifelaidout, told Realtor.com.
You might be able to get the best deal on a home or a mortgage right now, but it’s impossible to know that for sure.
Consider Your Own Financial Situation Before Buying
If your financial situation has changed or could change due to the coronavirus pandemic, consider if now is a good time for you personally to buy. To safeguard your financial health, it’s a good idea to search for homes that are under your budget so that you would be able to stay afloat if your employment and income situation were to change.
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This article originally appeared on GOBankingRates.com: 17 Surprising Reasons the Coronavirus Pandemic Could Actually Benefit First-Time Homebuyers