[Editor's Note: The following was submitted by author, podcaster, mortgage lender, and long-time WCI advertiser, Josh Mettle. Josh specializes in financing physicians, dentists, CRNAs, and other professionals with highly specialized professional loan programs. Josh is also a fourth-generation real estate investor and owns a number of rental homes, apartment units, and mortgages.]
The holidays are upon us, and more often than naught, prospective home buyers are putting their decision to purchase a new home on pause until Spring.
I get it, buying a home during the winter can be a little more challenging, even uncomfortable to pack up and move during the holidays when our tendency is to slow down the pace and relax a little.
If that resonates with you, then you can see why December and January are the absolute best months of the year to buy a house. The competition is enjoying the holidays and not out hitting the streets house hunting. The lack of buyers leads to longer listing times for sellers and more listings expiring without being sold.
The lack of holiday showings and offers make sellers more willing to negotiate the sales price of the home and/or give a concession towards your closing costs (which you can use permanently buy-down your interest rate).
For most of the country, we are still seeing solid real estate appreciation, but the winter months in many markets are the exception. I’ve copied the FHFA Home Price Index through September 2018 below, you can see most of the country (especially the Mountain region) is still in an uptrend of housing prices. Meaning that in most situations the seller is in control because there are still plenty of willing buyers.
However, in most states, buyer activity slows in the winter and sellers no longer have the advantage. In Utah for example, we have a pretty predictable season of appreciation from March through September, followed by flat or even negative appreciation throughout the winter months.
Best Months to Buy a House – Winter
The soft winter season is precisely when you can get the best price and lowest overall cost for your home and mortgage. Let me show you how!
1) Offer Below The Asking Price
Yes, this is elementary, but take a moment to think about the seller’s psychology at this point. They likely don’t want to sell in the winter, something urgent is likely driving the sale. Who knows what that could be, a divorce, job relocation, children not doing well at school, etc. Whatever the situation, know that no seller wants to have their home listed for sale over the holidays, so something is driving them to need to sell before spring.
Now to further add to the anxiety of the seller, keep in mind that home listing times can double or even triple in the winter. So that seller likely has an urgent reason to sell and is seeing low activity and very little happening, further adding to their motivation to be flexible to you the holiday buyer.
2) Ask The Seller To Cover Your Closing Costs
As interest rates have continued their ascent throughout 2018, mortgage rate increases are adding more to the total cost of homeownership than the home price increases most of the country has seen through the year. Most buyers don’t understand they can reverse the higher interest rate effect by employing a seller paid permanent interest rate buy-down strategy.
Let me show you an example, this is a Total Cost Analysis I created for a client who was considering making a low offer on a home. The client’s ultimate goal was to have the lowest overall payment and the Total Cost Analysis illustrated that using the seller’s funds to permanently buy-down the interest rate on the loan was three hundred percent more effective at reducing the payment than was a price reduction.
The first column below shows the market rate (based on their credit profile) and the full asking price of the home, which was four hundred thousand. This scenario resulted in a payment of $1,939.94 per month, which was above this client’s top qualifying amount.
The second column shows the same sales price with the seller paying nine thousand towards the buyer’s closing costs, which we used to buy-down the interest rate and decrease the payment to $1,801.60.
The third column shows a price reduction of thirty thousand dollars, which at the market rate (based on their credit profile), equated to the same payment as the nine thousand dollar interest rate buy-down.
In this scenario, the client needed a payment closer to $1,800 a month to qualify and the seller was flexible but not thirty thousand dollars flexible.
Using the seller paid buy-down strategy, not only made the transaction work for the client and seller, but it also ended up saving the buyer $27,568 in interest over the life of the loan (below). It ended up saving both the buyer and the seller a substantial amount of money. The seller paid buy-down strategy is a true win-win that few understand and even fewer are utilizing to its potential.
3) Negotiate Repairs To The Property Or An Escrow Holdback
Keep in mind the psychology of the seller this winter, there is a little desperation in many markets. They need to sell or they would not be listing over the winter, they are seeing fewer buyers and even fewer offers. They are feeling a little like the guy on the dating app who keeps getting swiped left (what’s wrong with me and my house?).
This is an opportunity to be bold and to ask for as much as your local market will bear.
The last strategy is to ask the seller to address any and all repair items that your home inspector finds. Ask your home inspector to be aggressive and to find everything down to the calk around the windows and bath that needs to be repaired. Then negotiate with the seller to fix these items found on the inspection report.
Josh Mettle
Most lending institutions will require the seller to complete these items prior to close but there are several who will allow an escrow hold back, where the seller contributes money from the sales price into an escrow account and the work can be completed post close of escrow. If your lender does not offer this, look around, they are out there.
House hunting in the snow and during the holiday rush might not be as fun as house hunting in May with the spring sun on your face, but that’s exactly why you should be doing it. Running against the herd is never easy, but that is exactly why you should be considering house hunting and making offers in December and January, which are hands down the two best months to negotiate and receive the best terms from the seller.
When do you think is the best time to buy or sell a house? Comment below!
We just bought a house at the end of November and are selling our old one with a closing date at the begining of January. It was amazing to me how quickly things happened, but I think that’s because it remains a seller’s market in the south where I live.
It seems like there are so many factors that play a part, but it was obvious that things were slowing down for the winter as Josh alluded to in the post. We were stoked to get a list offer before it even hit the market on our old home.
That said, the timing was winter-ish for buying the new house, and we were certainly able to negotiate a decent amount of coverage for closing costs.
TPP
These really are great pointers for potential home buyers. The same thing could be said of buying cars at the end of the year as the dealers are trying to get rid of older models before the new ones arrive.
Do you still find this phenomenon in states where there really is mild winters? (Hawaii, southern california/texas/Arizona come to mind).
I agree with the philosophy that it has to be a motivated seller who lists a home over the winter months. There has to be some underlying reason and thus deals can be made.
The most important factors to consider are the ages of the heating and cooling systems and the age of the roof and driveway and age of Appliances
Check the basement to see if there is a water pump; My home never had one nor did we ever have water
Any repairs by the seller have to be documented with paid receipts given to the realtor
Have an initial walk through followed by one on the final on day of closing
I disagree on your most important factors….The most important thing to think about when considering repairs is the size of the house. The bigger the house, the more expensive the repairs. Whether it be roof, floors, bathrooms, kitchens water pumps, air conditioners etc, it doesn’t matter. If your house is bigger, every single repair you have will be double or triple the cost of what it would be if smaller. For example, we bought our house in December of 2010. Got an absolutely great deal on the house given the time of the year and also the horrible housing market at that time. But we have had to update much of the house and are still undergoing this process. We just put in new carpet and the cost was 10K mostly due to the amount of square footage. We have also replaced the roof, even though it was a new roof when we moved in. Thankfully this was covered in our homeowners policy due to hail damage, but I was amazed at how expensive it was. Remodeled the master bathroom…..which wouldn’t be expensive if you have a 100 sq foot bathroom….however when it is an 800 square foot bathroom those remodeling costs can be exorbitant. To sum it up, Size Matters…and matters most when considering a house.
Although I hope to never buy/sell a single family home again, I love books about practical application of data and recently read Zillow Talk. It discusses multiple ways to stack the odds in your favor. Super intriguing. It takes this post further by several orders of magnitude.
What is the difference in home supply during winter? I know, varies by market, but is there similar larger scale estimate data? My only experience has been in a high demand community near a military base where homes on the market longer than two weeks is almost unheard of. The winter alternative PCS cycle has a few homes for sale now, but nowhere near what I see in the spring.
It depends where you live
This is prime shopping season if you live in a sunny coastal area
We are sitting this out until the middle of summer when it’s incredibly hot and humid. That’s when home sellers get desperate in our area (perhaps even coupled with an impending economic crash?)
If you have kids, pulling them out of school and having them be “The new kid in the class” two weeks later is another negative of winter home sales. If you sell in the summer, all kids are equal when they begin a new class in Sept…….Gordon
I was on Zillow yesterday looking at a mansion in Rehoboth Beach running for $5.1 million. I would assume Winter months are the best tome to buy because people are more concerned with buying oil for their current home and keeping lots of food, canned goods, and water-juices stocked in their refrigerator and basement. Hopefully my comment is right on the $ gUaP $. 🙂
One usually buys and sells around the same time. So won’t the benefits and downsides balance each other out for each role one plays as buyer and seller.
#1 – big assumption is the list price was accurate in the first place
– far too many buyers assume that seller priced it correctly
– not that I’m assuming they are rational ….big fan of throwing out an offer and see if they take it (for rental property /investment )
– plus if its contingent on inspection all you really need to do is get an accepted offer – then the fun really begins – can go back and ask for price reduction /repairs after home inspection
I agree an inspection is just a chance to reopen negotiations.
not if purchase of for rental / investment purpose
Yes. But if you’re selling a cheaper house and buying a more expensive one, you could come out ahead.
is there a good source of information for region specific best times to buy a house? i live in southwest florida and the winter season is when everyone is “wintering” down here from the north. i asume that would make the winter months better for sellers here, but i dont know for sure.
Hi,
Would you recommend not using a buyer agent to lower the price , as there will be no buyer agent to pay for by the seller. We did this when we bought our first home from the builder. Not sure if this can be done when buying from an individual seller.
Thank you.
You can do it, but that seller’s agent may still want the 6%. He’ll just keep it for himself. It may not end up being a discount to you due to theri contract.
My husband and I want to buy our own house, so we wanted tips on getting the best price! I didn’t know you should hit the market for a house in the winter because the competition isn’t as high and sellers are more willing to negotiate with you. That’s a little tip my husband and I will use, so I’ll look for houses we like now and we’ll negotiate prices with sellers when it gets colder, thanks to this post!
It’s interesting to know that sellers will probably have an urgent reason to sell a property, therefore, offering a low offer at first could be a good idea. My husband and I are thinking about buying a vacation property, and we are looking for advice. I will let him know about your recommendations to help us choose the best vacation property for us.
Thanks for explaining how the winter season is usually the time that you can buy a property for the best price. I am interested in using the inheritance I received from my uncle to purchase a luxury home with a pool, but I am worried that my limited budget may make it difficult for me to find something affordable. I’ll try to look for a home during the winter so that I can find the best prices.
Before Christmas, if you can…if not in January or February
All my deals occurred when competitors were lazing away on some beach in Miami…lol. If there is an old lady that died, the inheritors often just want their cash and possibly, they meet at Christmas, especially when money is hovering above, … and then decide what to do with a house they no longer want.
In January, a lot of people need money when the bills come in from lavish Christmas Spending..hey, it’ s just the Slivering Reptile in Me that thinks that but it works..… lol…
PS> I’ll help ye ..I used to say and create Win-Win-Win years in a row..but probably, the best time is during the Rainy Hurricane season in August September… Reptiles use chaos, then bring back order…lol PS> Still, I’ve never been in Jamaica at that time so my Inner Reptile sometimes must be dormant…lol
Decide who you are and what owning a house means to you. I find it fun to buy the cheapest house on the street in a ritzy neighborhood, then beef it up. It was fun. It gave me lots of Confidence and has always helped me to attract ma Deesse, my female ratus, ma petite canaille a Moi, .lol… Self Confidence is very sexy.
Love Life Loud and Clear
I think the article was mostly about personal residence, but I suppose it could apply to rental properties too!
I didn’t realize that December and January were the best times of the year to purchase a home. I remember my brother mentioning that he would like to find an affordable house that is close to the school that he will be attending this year, but he is worried that there may not be many homes available during this time of the year. He’ll be happy to hear that he should be able to find some affordable options this month.
There are a definitely fewer sellers, but there are A LOT fewer buyers.
I like that you mentioned how sellers may be more likely to accept low offers during the winter since it may cost them more to keep their house until summer. I remember my cousin mentioning that he would like to find a spacious house that he can move into before the end of the year so that he and his wife can try adopting a child this spring. Maybe he should consider looking for homes now since they may be within his price range at this time.