Home Buying in a Sellers’ Market
I went house hunting last weekend. No, not for me. I tagged along with my daughter and her fiancé, who are moving from Texas to Colorado after she graduates from vet school (insert party hats and noisemakers here) next month.
Even for this seasoned house hunter, the experience was humbling. In over three decades of being in and out of the housing market, I have never seen so many over-priced, underwhelming houses sell for over the asking price in the time it takes you to say new paint.
Last weekend, we toured 12 houses. By the end of the weekend, all of them had gone under contract, including the one the kids made an offer on and did not get.
Now here’s where I need to pause to deeply inhale smelling salts. On the one house they liked, the one that actually made their hearts beat a little fast, they made an all-cash offer for $15,000 over the asking price. (They had both sold their respective homes.) Now, one would think that would get the seller’s attention. But no. The selling agent sent a text to our agent that literally said the offer “does not appeal.”
Does not appeal? What kind of world is this?
She was expecting higher offers with a longer rent back. (The kids need to move in June 1 for my daughter’s job. The seller wants to live in the house for five months at no charge after it closes.) The house sold for $100,000 over asking. You think I’m kidding. I wish I were.
“Not even a counteroffer?” I asked our agent incredulously. Nope. Not in today’s market. Sellers get a dozen offers and pick the one they like best.
And so it goes in the bruising world of home buying. You set out with a wish list and keep lowering your bar. In this case, the kids want a decent kitchen with a counter to accommodate barstools, an under 20-minute commute to the vet clinic where my daughter will be working and could need to get to fast in an emergency in the snow, a fenced yard for their two dogs, a garage big enough for his truck, a little curb appeal, a little charm, a walkable neighborhood. And, though they are willing to make some improvements, they don’t want to add a home remodel on top of two new jobs and a new marriage in a new state.
Yet as we toured homes for sale, the word that kept coming to mind was a word I loathe: settle. Well, if we replace the dated light fixtures, the worn stained carpet, and the circa 1970 laminate counters, then maybe we could overlook the fact that the house backs up to the interstate, and the basement smells like wet dirt and has a natural light level conducive to growing mushrooms and harboring a bat colony.
If you are in the market for a new house, and Lord help you if you are, here are some harsh words of advice from seasoned real estate agents to help buyers prevail in a sellers’ market.
· Don’t expect a deal. Do not expect to purchase the home for well under the asking price or for the buyer to cut the price to allow for needed repairs.
· Make your best offer first. Shockingly, you may not get a chance to negotiate. The stories of multiple offers in 24 hours after a home gets listed are real and are happening nationwide.
· Come with proof of funding. If you can swing all cash, do it. Next best is to bring as much cash to the table as possible. If you’re financing the purchase, have a preapproval letter from a mortgage lender who has verified your finances and your credit.
· Shop for homes a little under your budget. This not only allows room for you to offer over asking, but also will leave some funds for improvements, which you’ll probably need to make.
· Get a great agent. At no other point in your life are you likely to spend more money in less time than when you buy a house. When making an investment this important, you want to work with someone who is knowledgeable about the neighborhoods you’re looking in, has good relationships with other agents, gets tips on houses about to come on the market, is a creative negotiator, and can act quickly in your best interest.
· Steel yourself. Keep a level head when making offers and negotiating to avoid making a bad financial decision out of desperation and emotions.
· Remove contingencies. The more contingencies buyers build into their offers, the more likely sellers will reject them. After securing financing, passing a home inspection, and getting an appraisal are the next big hurdles. Though a home inspection is important for buyers, in some markets, buyers are willing to tell sellers they will waive all but the most significant issues. Because appraisal prices typically lag behind market prices, if houses are selling at historic highs, some homes won’t appraise for the selling price, which means the loan may not go through. If buyers can show they have the cash on hand to close the gap between the appraisal and the contracted purchase price, that’s a plus.
· Offer more than money. Find out what in addition to price matters to sellers. Maybe they want a quick closing, or a flexible moving date, or a rentback period. Some nostalgic sellers favor buyers who promise to appreciate their homes as much as they have, whether for its historic architectural heritage, or the avocado orchard and tire swing out back. Buyers who let sellers know that they share the owner’s love for the home may come out ahead.
CAPTION: Buyer Beware – In a hot sellers’ housing market, houses often sell quickly for well over the asking price, after sellers receive multiple offers. Photo courtesy of Eberdova for Dreamstime.com.