With the inventory of homes for sale in the U.S. now at an all-time low and selling prices higher than ever before, the battle to buy a home has been elevated to a whole new level.
In April of this year, the number of homes for sale was down 40% from a year ago and 50% from 2019; home prices are 20% higher than last year, according to Redfin, a real estate transaction website.
However, demand for homes is still rising sharply. According to Redfin, about half of all listings sell within a week, and nearly half sell for more than the asking price. In this case, bidding wars and price spikes are typical, and buyers are taking a lot of risks to get a home.
For example, buyers ignore when a home’s appraisal does not match the offer; don’t care even when a home inspection reveals that the home needs expensive repairs; many buyers offer much more than the seller’s asking price; and even give lavish gifts to the seller in order to get the seller’s attention. One buyer in New Jersey even promised the seller a vacation at their villa in the Caribbean.
How should you compete in such a competitive housing market? CNN cites advice from several real estate experts to give tips to the average buyer so you can be more competitive.
Broaden your search
Buyers who are always in the market and can’t get a contract will realize they need more money or need to lower their requirements to get a home,” said Javier Vidana, a real estate agent with My Home Group in Phoenix. those buyers who don’t have more money on hand will need to expand their search to find properties that were previously overlooked.”
He cites the example of one of his clients, Mr. and Mrs. Melott, who looked at 10 homes over a six-month period, but didn’t buy any of them. The couple from San Jose, California, wanted a good deal on an inexpensive home in Mesa, Arizona, but ended up with no deal because the other buyers offered 10 percent more than the asking price; without exception, all were cash offers.
Mr. Mellott said, “We all got to the point where we offered $450,000 for a house listed at $400,000 and waived the home inspection and home appraisal and still couldn’t get the house, we were completely hopeless, you need to have cash in this market or you can’t buy a house.”
So in the meantime, the Mellott’s were checking out new listings on real estate websites until they finally came across a home that had been on the market for 16 days, was priced within their reach, and was located in a high-priced residential area they had never searched for before.
It was a three-bedroom, 1,800-square-foot house with a pool and an outdated interior, but it met all their needs. Best of all, they didn’t have to compete with a long list of buyers to buy the house.
The Mellott’s quoted $436,000 at the asking price, their offer was accepted and the home was appraised as being worth that amount.
Melotte says, “We got everything we wanted.”
Take the risks you can control
Joseph M. Palmisano, a broker with a Concord, N.H., real estate firm, says all buyers need to have enough money, but being able to waive some procedures like home inspections and appraisals can make a buyer look more attractive, which also means the buyer may need to be prepared for some additional expenses.
A couple wanted to buy their first home while the interest rate on their loan was still low, and they were also required to move out of the house they were renting at a certain date with the birth of their son on the horizon. They bid on a house in Phoenix listed at $299,000 and offered $310,000.
However someone outbid them by $40,000 and it was an all-cash bid, and of the 10 buyers who bid on the house, five were all-cash bidders. And they also heard that the buyer who struck the deal also promised to let the seller stay in the house for an additional six months.
They said, “We couldn’t compete with these people, we couldn’t bid with all cash, and we really needed to get the house.”
To their surprise, they still got one of the houses they wanted to buy. This time they paid $20,000 more for a house listed at $295,000 and took unexpected risks, such as the fact that they waived the appraisal of the house, which they took because they wanted to buy it.
The seller accepted their offer. They had a home inspection, which cost less than $500. The inspection revealed major problems, which were resolved 50/50 by both parties. The seller repaired the roof, while they took care of the termite problem in the house.
They said, “We had to take some risks or we wouldn’t have been able to buy the house.”
Offer the seller some valuable gifts
Although the National Association of Realtors publishes guidelines urging buyers not to offer additional gifts to sellers when making an offer, it’s an approach worth trying.
A couple who agreed to take on all the risk of surprises when buying a five-bedroom house in New Jersey listed at $1.5 million added $50,000 to the asking price, but they were concerned that their offer still wasn’t attractive enough.
The buyers learned that the seller sometimes lived in the Caribbean, so they wrote a letter to the seller saying that they too enjoyed living by the sea and inviting the seller to take a free vacation at their villa in the Caribbean, a bid that paid off for the couple.
Bidding on the Seller’s Preference
Sometimes it can be more attractive to agree to certain requests from the seller than to simply raise the price. For example, giving the seller more time to move out may be more attractive to the seller than just increasing the offer.
Sometimes buyers overlook what sellers need, says Joseph M. Palmisano, a broker with a Concord, N.H., real estate firm. While every seller wants to make more money, many sellers in today’s housing market are actually buyers themselves, so they may want to be able to rent the home they’re selling for a period of time so they can have enough time to move. That way they can have enough time to move.
He cites the example of one of his buyers who, in making an offer, promised the seller to stay in the guest room of their house for a period of time, and the seller accepted the offer.
He says, “The seller was willing to accept that offer because they were probably also buying a house and needed a turnaround time.”
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