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If you're thinking of buying a home in 2025, you'll want to act sooner rather than later. If you wait for interest rates to drop, you could lose out on your dream home because it's still a seller's market. Some real estate agents even think prices may continue to rise in some areas.
“I think the market will be relatively flat, with the potential for modest price increases,” said Robert Washington, founder of Savvy Byers Realty in Clearwater, Florida. “As interest rates start to come down, I think buyer demand will increase.”
Dottie Herman, vice chairman and former CEO of Douglas Elliman Real Estate, said the market is starting to stabilize, but home price growth in some areas will be less than 5%. He said it was possible. He also said there is a possibility of another rate cut in 2025, but he doesn't think there will be a significant surge in buyers. “I think rates will go down, but I don't think they'll go down by much. I think you'll see them go down slowly.”
Another point worth noting is the decline in interest rates. These aren't red flags (in and of themselves), but you need to lock in at the right time to save money, while also making an offer on a home early enough to avoid losing out to cash buyers.
The 2025 red flags relate to homes that require major repairs, sellers seeking exemptions from home inspections, and buyers who do not have pre-approval or attempt to negotiate beyond the cost of necessary repairs. GOBankingRates asked multiple experts across the country how buyers and sellers alike can avoid expensive real estate red flags next year. Here are their opinions:
Don't lock into a 30 year mortgage
Mr. Herman advised buyers not to feel the need to lock into a 30-year fixed-rate mortgage, especially if there are signs of further interest rate cuts from the U.S. Federal Reserve.
“Most people don't stay in their homes for more than 30 years, so you might want to consider an adjustable-rate mortgage because it's a cheaper place to start,” she says. There is an important caveat here. Make sure the maximum rate is an acceptable number.
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Shop based on what you can spend, not how much the bank will lend you.
Obtaining a mortgage pre-approval is an important part of the home buying process. But if eating out, traveling, and other expenses are more important to you than having a big, beautiful home, you don't want your home to be poor.
“Go to interviews with three banks and three mortgage companies,” Herman said. “Find out what your bank will lend you. Once you know how much your bank will lend you, look at the numbers and decide what's comfortable for you to spend. It doesn't mean that there is.
Beware of sellers who try to get you to skip the home inspection
In a seller's market, homeowners often ask potential buyers to waive home inspections. The real estate agents we spoke to agreed this was a bad idea. “Everyone should always have an engineer's report. No one should avoid it,” Herman said.
She recommended going through the home with a home inspector to point out damage and provide an estimate of repair costs so you can negotiate a better price.
Look for structural damage, foundational issues, and signs of flooding or leaks.
Herman advised paying close attention to signs of major structural damage or fundamental problems during the site inspection.
Michelle Griffith, a luxury real estate broker at Douglas Elliman, agrees. “Buyers should contract with a good property inspector to thoroughly inspect the condition of the property to ensure that no potential foundation issues, water damage, or plumbing issues come up unexpectedly. If there are signs of water intrusion, it could be costly for the buyer to remediate depending on the extent of mold found in the property,” she said.
Be wary of homes with old appliances
Old appliances and a dilapidated roof or oil burner may not be a reason to leave your home, but you may want to reduce your offer. “Know the age of all your big-ticket items and when they need to be replaced,” says Washington. “If you have to replace your roof or HVAC system soon after purchasing your home, it can put a huge strain on your budget.”
Beware of buyers who try to exaggerate repair costs
Ideally, sellers will get a home inspection before listing the property. That way, you will know what repairs are needed and how much they will cost. “It's usually important to fix any foundation issues or leaks before putting it on the market,” Mr Griffiths said. If a home is in good condition, buyers have less room to negotiate and can potentially get a higher sales price.
If you choose not to make repairs up front, be sure to check with your listing agent to find out how much the repairs will actually cost, Washington advised. “Some buyers may request credits or discounts from larger sellers for relatively minor items found during home inspections.”
Beware of non-pre-approved buyers
“We will not accept buyers who have not been pre-approved for a mortgage, unless they are buying all cash,” Herman warned. “The last thing you want as a seller is to wait six weeks and then find out the person can’t get a mortgage.”
Time is money, and every time your home goes under contract without selling, you could be missing out on a better offer from a more qualified buyer. “Every day it's on hold and off the market can be a loss,” Washington agreed.
