6 strategies for buying a home in a busy sellers’ market
When Mario Castellitto bought his home this summer, he found he was in a frenzy Bidding wars and rising property prices. Before the attorney landed a home in Connecticut, he made generous offers on multiple properties only to lose to more aggressive bidders.
“It was incredibly frustrating,” says Castellitto. “A house would go on the market in the morning and by noon it would be gone.”
Castellitto insisted – he eventually closed a deal by offering $ 16,000 above the seller’s price. His experience has become common throughout the unusual housing market of 2020.
Too many buyers are chasing too little inventory. As a result, buyers are offering to pay more than list prices. Those with the funds can dangle cash offers and even skip reviews and inspections.
“It’s just bananas,” says Andy Sachs, an agent at Keller Williams in Newtown, Connecticut, and Castellitto’s agent during his house hunt.
The coronavirus pandemic has resulted in an unbalanced housing market in much of the country. Reduction in supply and increasing demand. In addition, mortgage rates have fallen Record lows, a trend that is encourages buyers to raise prices even further.
As a result of these forces, prices have risen sharply. According to the National Association of Realtors, the average price of homes sold in the United States in September rose nearly 15 percent year over year. Some states are experiencing an even faster appreciation. In New Jersey, the jump was 23 percent over the previous year.
The shortage of stock is a nationwide trend. With the exception of Manhattan and San Francisco, most real estate markets have strong demand for a limited supply of homes. Brokers from Rhode Island to Texas to California report bidding wars and invisible offers.
Buyers face dwindling competition
For potential buyers, paying a little more is not just a matter of paying for a home in this market. The lack of supply has added a new level of difficulty and drama.
Desirable properties are bullied by qualified buyers, says Donnell Williams, owner of Destiny Realty in Morristown, New Jersey.
“There are 40 people in line. It’s incredible, ”says Williams, president of the National Association of Real Estate Brokers.
Given this reality, buyers need to put on their game faces. And home buyers who need mortgages can find themselves at a disadvantage.
“Now you are competing with cash buyers,” says Williams. “You are competing with people who say, ‘I’m not rating.'”
Here are six strategies for navigating an intense seller market:
Rule 1: move quickly
Shortage of inventory means that houses sell quickly. Sachs urges buyers to prepare to view properties as soon as they hit the market.
“We recommend that buyers attend the demonstrations on the first day if possible,” he says. “It probably won’t be long. And you want to show the seller how excited you are about the house without lining up and hacking and asking a million questions. “
With so many buyers foregoing evaluations and inspections, now is the time to haggle over minor repairs and other minor sticking issues.
The need for speed means that there are many buyers too Make offers before you even step into a property.
Rule 2: Go through full underwriting before purchasing
During quieter times, a pre-approval letter from a lender will satisfy most sellers. Nowadays, a pre-approval letter is no guarantee that your offer will be accepted.
In the midst of a recession, many borrowers’ jobs are on shaky ground, making the pre-approval letter less reassuring. Sellers looking at multiple listings will choose the safest one.
Sachs’ advice? Go way beyond a pre-approval letter.
“If you need a mortgage, make sure you’ve got the full underwriting,” he says. “Then only the evaluation remains.”
A pre-approval letter is based on a preliminary check of your creditworthiness but is not the last word.
“It’s sometimes like being as good as a cash buyer if you just complete one review to complete the process,” says Sachs.
Rule 3: Make an aggressive offer
In normal markets, the offer price acts as a cap. It is a number that reflects the aspirations of the sellers, but not the reality of the market.
In this market the asking price is often the bottom. Castellitto says he lost several Connecticut homes that sold well above the asking price.
The brokers’ statistics reflect this reality. In September, New Jersey homes sold 99.9 percent of their list prices, up from 97.6 percent the previous year, New Jersey Realtors report. In Florida, homes were sold at 98 percent of the asking price in September, up from 96.7 percent the previous year, according to Florida Realtors.
“You have to do your best immediately,” says Sachs. “You should go to or across the market. If you have the opportunity to offer cash, go for it. “
A cash offer typically means fewer contingent liabilities in terms of appraisals, inspections, and retention, so sellers will rate these offers positively.
Rule 4: But don’t overpay
In a market characterized by sharp-edged buyers, pay too much for a house is a real threat.
“When you see that several people are offering more than the asking price, the fear of missing out kicks in,” says Castellitto. “As a buyer, you have to be careful. You can get caught up in it and pay more than the house is worth. I walked away from several houses because they just weren’t worth it. “
Castellitto had been watching Connecticut property prices for over a year before buying them. Until the COVID-19 pandemic this spring, the state was a buyer’s market.
“Houses would sit on the market for a year,” he says. “You would see them come out at a certain price and then they would just fall, fall, fall.”
That is no longer the case, of course, but the recent history of the real estate market gave Castellitto a perspective. While property economists believe that property values are unlikely to plummet, the Great Recession is not too reminiscent of the dangers of overpayment.
For sellers who need financing, the valuation can act as a guard rail against excessive payments. While appraisers understand that values are rising, they are unlikely to assign an over-aggressive value to a home. If the valuation falls short and you still want the house, you’ll need to add more money to the business to make up the difference.
Rule 5: Establish an emotional connection with the seller
This is not always possible, but it is worth trying. If Sachs believes the sellers will like the buyers, he encourages the sellers to stay home for the show. The strategy: If the seller establishes a connection with the bidder, this offer can stand out from other similar offers.
“Residential real estate is in equal parts emotional and financial,” he says. “If you can apply the emotional part and the salespeople can imagine that you live in their home, where they raised their children and they have great memories, it can give you an edge.”
In previous sellers ‘markets, buyers’ agents tried to highlight their customers with “love letters” – personal appeals from the bidder to the seller. This time, Sachs says, his local real estate agency has discouraged the practice. In addition, COVID restrictions can make face-to-face encounters impossible.
Rule 6: Be prepared to wait until next year
The intensity of this seller’s market surprised almost everyone. If you prefer a more leisurely pace, it may be useful to hit the pause button.
“Wait for the market,” says Castellitto. “I would do that.”
Predicting the direction of the real estate market is a breeze, of course, but it is possible that the real estate market could wear off over the next year. The coronavirus pandemic was just beginning the spring sales season and many potential sellers chose not to sell.
If these homeowners choose to launch their homes in the spring of 2021, the supply and demand spectrum could fall back on buyers.