5 Home Finance Trends on Their Way Out, According to Real Estate Experts

The ever-changing real estate market has led to a lot of flux over the past two years. Things that people used to take for granted in the world of real estate — like shopping around for the best interest rate — seem to have fallen out of favor with both hopeful homeowners and sellers. Here are a few real estate trends that have become less popular in the world of home finance, according to the pros. 

One of the biggest barriers to homeownership these days is needing unheard of amounts of money in order to come out on top in bidding wars. According to Realtor Jennifer Baptista, that trend has finally started to come to an end. “People are sick of over paying and getting beat out by $100,000,” she explains. “I think finally we might be seeing light at the end of this wild market tunnel!” The days of making offers way over asking price may soon be over.

With the cutthroat nature of this market, it should come as no surprise that experts are seeing a lot less contingencies in their offer letters. “We are finding that buyers have begun to remove mortgage contingencies in effort to better position their offers in this uber-competitive market,” explains Jeffrey St. Arromand, a licensed real estate salesperson on the Tricia Lee Team at Serhant.

Sellers are probably not going to love this news, but according to Andrew Westphal with Corcoran, the days of not having to worry about the appraisal coming in below asking are coming to a close. Last year, it was common for appraiser’s to report a home’s value significantly above the asking price thanks to high demand inflating values.

“Appraisals have all of a sudden stopped coming back at contract price or above,” he says. The return to lower and more consistent housing valuations also means that we may be seeing the beginning of the end of appraisal gap payments, which was what people were doing when their accepted offer was higher than the appraised value of the home. 

It seems like borrowers who typically would’ve gone the all-cash route are opting to finance their purchases to take advantage of lower-than-normal interest rates. “Many buyers that can go all cash have decided not to do so, as rates are so low,” St. Arromand explains. “Therefore, eliminating a mortgage contingency is essentially a cash offer without having to touch liquid assets.”

Since he says mortgage brokers rarely advise buyers to remove mortgage contingencies (there’s a risk of losing your deposit if you’re unable to get a mortgage approval) this is another way clever house hunters are getting away with dropping contingencies while still protecting their assets.

There are a lot of good reasons to check into refinancing your current mortgage (getting to skip one of your monthly payments being among them) but it sounds like rising interest rates are making it a little more expensive to refi, especially after you factor in the closing costs.

“Once the [borrower] crunches the numbers, they realize due to the increased interest rates, the saving to their monthly cost is negligible vs the out of pocket closing cost,” St. Arromand says.  

This piece is part of Money Month, where we’re covering everything from side hustles to down payments to a beginner’s guide to investing. Head over here to read more!