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Help! What do I have to do to get a house in this crazy seller’s market?
Dated: March 18 2021
6 solutions that may win you your new home in 2021
You want to buy a home. You are READY to buy a home. It’s so exciting! But your excitement is quickly dashed by the reality of the intense competition out there right now for homes (which are in very short supply). And now instead of excited, you feel uncertain, frustrated, and hesitant. Is it actually a good time to buy a home after all?
I hear your frustration and concerns, and I can help.
No, this is not a ‘normal’ seller's market
The real estate market today is very unusual, highly-competitive, and influenced by many different forces, including the Covid-19 pandemic. The good news is that these circumstances won’t last forever. And even GREATER news is that despite this crazy real estate climate, my buyers are STILL becoming homeowners.
Let’s look at how my team and I are helping our clients be the winning buyers by following these tips I recommend for anyone who’s looking to buy right now. (Note that a few of these solutions would be considered ‘taboo’ in a normal market, but they are proving to be effective right now).
1. Get pre-approval for a mortgage
People put this part off; it is the equivalent of going on a cross-country road trip without filling up the gas tank, putting air in the tires, and stocking up on several pounds of Cheetos for the drive. You need to know how much money you qualify to borrow, what type of loan program you can get, and how much cash-on-hand you need to complete the home purchase. Connect with a lender to get your pre-approval in order prior to even looking in the direction of your first home.
2. Prepare to write an offer OVER the asking price on a home
Sellers are savvy. They see their neighbors’ homes go up for sale, followed by a frenzy of activity, and finally a successful sale at well over the asking price. Any home that is priced at or just below market price feels like a Walmart Black Friday sale; everyone is racing to get in, look at the place, and grab the last 32” TV. The average home is selling at over 100% of asking price right now. And it is a rare gem that sells for less. Be prepared to offer over the asking price.
3. Consider waiving inspection
Up until 6 months ago, no realtor in their right mind would advise their client to waive an inspection. Don’t tell my inspectors this, but we are having this discussion with a lot of our clients right now. In this competitive offer scenario, which is EVERY SINGLE HOME WE ARE writing offers on, many offers are coming in with no inspection contingency. Sellers like this, because it means they don’t have to experience the ‘wait and worry’ that there might be a complicated second negotiation to address things that were found in the inspection. And ultimately, they don’t have to worry that a buyer might pull their offer.
Any homebuyer that chooses to waive an inspection needs to make sure that their first (and sometimes only) viewing of the home is absolutely thorough. That means checking for leaks, water intrusion in the foundation and basement, verifying the age and functionality of appliances and mechanical systems (actually turn them on and run them), test every light switch, open and close the garage doors, etc. This may be your only opportunity to ensure your choice to waive an inspection is a good one.
4. Get a home warranty
If you have waived the inspection, get a home warranty. And confirm that the warranty will cover everything you need covered. For example, if the home’s furnace is from the middle ages, you know it will be going out soon; make sure the home warranty you choose will cover furnace replacement in a manner that is acceptable for your situation. If the roof is 18 years old, you know you will have to replace it soon; ensure the warranty covers it.
5. Read the sellers disclosures
If the sellers are honest, likely there is something that has happened during their time living in the home that is worth disclosure. Make sure what you are physically seeing at the home is matching what is disclosed by the sellers. If you later discover an intentional omission of material fact, you can sue the seller or take them to arbitration. To avoid that, do your due diligence ahead of time, even if you are in a hurry to submit in multiple offers.
6. Consider finding a way to write an offer that is not “contingent upon sale”
Right now, contingent offers are like Kryptonite. If you need to sell your current home, there are a number of ways to make sure that that is not actually part of the offer you are writing. If a seller gets 10 offers, and 9 of them are not contingent upon a sale of the buyer’s property, you can rest assured that, even with a high sale price, the sellers will likely pick the “sure bet” of a non-contingent offer. Ask your preferred lender about a bridge (swing) loan or about secondary-market lending that allows non-contingent purchases. Or perhaps you are in a position to take the risk of writing a non-contingent offer, even though you need to sell in order to buy. In this situation, you may actually qualify to own both homes, at the same time, for a short time period.
Yes, it will be a buyers’ market again someday
But when? No one knows. It is subject to a huge number of factors, but it will change. In the meanwhile, find a realtor that you trust. Pick one who knows the market, studies the market, and keeps abreast of changes and forecasts in the market that might affect you. And be prepared to adjust your buying and financing strategies.
Don’t let the fear of a negative equity situation stop you from buying a home
One of our lenders has a zip-code specific formula for showing how quickly equity is recovered in this market. Most buyers are shocked to see how quickly they make their money back. The market is hot, and prices are rising, but they are likely to stay up. Most predictions are that no equity will be lost, and this is a great time to buy, despite these factors.
All things considered, my advice is still to buy now
This is a perfect formula right now: Interest rates are historically low, and even a 1% rise in interest rates will affect your ability to buy. There is little doubt you will have less buying power in a year. Sale prices will likely not drop at all, let alone substantially, and with the low interest rate, you should buy now. Don’t fear this seller's market. Embrace it. Remember, we are here to weather the storm with you and will be proud to be standing with you at the finish line.
Licensed Realtor, Stand-up Comedian, and Retired Police Sergeant. I took my 25 years of law enforcement experience, threw in my experience as a stand-up comic and college teacher, and used those ideal....
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