Is this a frustrating market for home buyers or what? With our record-low inventory, buyers and their agents are worn out from putting in offer after offer. If you see a newly listed home and the photos look amazing, you WILL be in a bidding war, every single time. This is our reality and it has been getting steadily worse over the past 5 years or so.
First of all, why is this even happening? As mentioned above, We have a shortage of homes for sale, which is a basic, supply-and-demand problem. More homes are being built, but the soaring costs of lumber (and other materials) cause the new homes to be unaffordable for most people. Investors are making it worse by swooping in with cash offers. Sellers prefer cash offers because they are quicker transactions and they don’t have to stress over appraisals and inspections.
Homebuyers are doing things they never had to do in the past. These are the 4 things buyers are doing now just to get a house:
Offering thousands of dollars over asking price.
Using an addendum to the offer contract called an Escalation Clause that states that they will pay “X” number of dollars over the highest offer the seller has in hand.
Waiving the appraisal contingency. If a buyer is obtaining a mortgage and has less than a 20% down payment, the lender will require an appraisal. If the appraisal comes in too low, then the buyer will need that extra cash to make up the difference.
And worst of all--waiving their right to a home inspection.
Here are some ideas to help:
Choose a full-time, experienced Realtor who will proactively seek out inventory for you. Sign an Exclusive Buyer Agency contract with that Realtor. Great real estate agents will work very hard for you and they need to have that agreement in place. An agent cannot spend time searching for the right home for you, just to have you purchase one through someone else.
Make sure you are pre-qualified by a well-known, local mortgage lender. This must be for a Conventional loan; sellers rarely accept FHA or VA loans nowadays.
Only view homes that have been on the market for awhile. Yep, that means they have issues, but issues can be addressed.
Do have flexibility on your floor plan, location, school district, and even price range.
Don’t go for the perfectly-updated home. Be willing to do a little work yourself.
Above all, don’t overestimate what it will cost (time and $$) to update/upgrade the house to what you have been dreaming of:
Appliance packages can save you a bundle. There are appliance packages at Best Buy for a stainless refrigerator, dishwasher, range, and microwave/range hood as low as $2,500—really.
Don’t let flooring cause you to reject a home. The new luxury vinyl planks look great and are inexpensive. Rip the old, yucky carpet out yourself—it is kind of fun and not difficult.
Odors are a turnoff! Smoke smell can be cleared out with ozone machines, thorough cleaning, and repainting.
Everyone knows that a little paint can go a long way. If you aren’t good at it or just hate doing it, it may not be as expensive as you think to have it done professionally.
Wallpaper removal is a “bear,” but I got my own house at a bargain because it was just full of it. The house sat on the market for months and I nicknamed it Wallpaper Hell House. The walls were not properly prepared before all that wallpaper was put up, and that created a nightmare for removing it. Still, it totally paid off to take on that dreadful chore.
Landscaping is easy and fun to do and makes such a wonderful change in the appearance in the home. It is great therapy to work in the yard, so don’t rule out a home with weeds, thin grass, and blah bushes. You might find a new hobby here.
If the furnace, air conditioner, and/or water heater are old, deal with it, so long as they are functional. Get a home warranty; it is only about $600. Make sure you keep up the warranty when it is time to renew! That way you are (partially) covered when the mechanicals eventually wear out.
What caused the housing shortage in the first place?
The housing shortage began before the pandemic.
The pandemic did cause people to look more closely at their living situation, especially if they began working from home. Many people decided to move elsewhere or to get a larger home that would have a nice office space.
Lower interest rates put more buyers in the market.
The vicious circle of homeowners NOT listing their homes for sale because the ones they want to buy are in short supply or too expensive.
Builders were building fewer homes for the past decade.
The “right” kinds of homes (in Deb’s opinion) have not been built and are still not being built. For example, Deb has hundreds of Seniors wanting to downsize into one-level living. These homes are extremely difficult to find. If they were available, Deb’s clients would put their existing homes on the market right now.