A Buyers Survival Guide to Today’s Market
With inventory stuck at record lows and an ever-increasing demand for homes buyers have a tough market to navigate. The toughest markets for buyers right now are entry level homes and homes under 500k. You are competing with investors, both individuals and institutions who realize housing offers the best return on investment right now, traditional first time buyers and returning homeowners who now qualify for homeownership again after losing their previous home in the downturn. What makes it the most difficult is there simply aren’t a lot of homes on the market in this price range.
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Multiple offers are now the norm so be prepared to write many offers and don’t get discouraged when your offers are not selected. When 20 offers are generated on a home, only one is able to proceed to escrow; 19 others have to move on. I have a few buyers who have written a purchase contract on more than 15 homes. There simply is not enough inventory to satisfy the number of buyers waiting to purchase and until there is you are going to have to keep writing.
There is also a ton of cash in the market, currently a third of all transactions. Investors & institutions are bringing cash as are some traditional buyers who are borrowing from family and retirement accounts and then a couple of months after closing are obtaining financing. Simply put cash is easier & a lot more compelling to sellers. They don’t have to worry about loan contingencies and have a lot more surety they will close successfully and on time. So if your financing your home realize some of your competition is probably offering all cash, which will be hard for you to compete against.
When values rise quickly appraisals become an issue (it happens every time the market turns upward after a recession) especially with the new appraisal guidelines we have now so be prepared for the possibility of having to deal with an appraisal issue.
A buyer should approach the purchase price very carefully, knowing that they will be competing with many others who are going to be just as thorough. Homes ARE selling for more than the asking price; and, depending upon the property, way over the asking price. Pouring over most recent sales is essential, but factoring in pending sales is even more important today. Buyers need to have long-term vision. Take a look at the complete monthly payment and stay within a comfortable range. Today’s historically low interest rates are allowing buyers to buy a bit more property. So, the emphasis should shift from the price being offered to the monthly payment that will be paid every month of every year. Ask any homeowner who has been in their home for years and they could care less how much they paid for their home; instead, they care about the check they have to write every month to slowly pay off their loan over 30-years.
Making a compelling case can be the difference between getting your offer approved and getting writers cramp from filing out more offers. A realtor has access to enough information today to be able to craft a reasoned argument relatable to the seller for why they should select your offer. Now there are never any guarantees on what a seller will do but you need to give them the best justifications for selecting your offer in a market like this.
This market also demands agents find homes not yet listed for their clients. I dedicate a few hours every week to door knocking in neighborhoods my buyers are looking for to find sellers who aren’t on the market yet. Often homeowners on the fence can be convinced to allow a one party show if there is a ready to go buyer they can relate to.
Persistent buyers with reasonable expectations will find homes, and rest assured the active inventory will increase and should do so over the next few weeks as summer approaches. So be patient, be ready, make a compelling case, find homes before they hit the market and write, write, write and you will find that home sweet home.