With such fierce competition, what does an aspiring home buyer have to do to get a home?
“Say:” Seller, we’ll give you an extra $ 100,000 [asking] prize, and we’ll give it to you in cash, ”javier Vidana, an agent for My Home Group. in Phoenix. “Say those words and you have the house! “
“They need to know what they are competing against,” he said. “If home ownership is one side of the cliff, it has become more perilous and difficult to get to the other side. “
And demand has skyrocketed. About half of all listings are sold within a week, according to Redfin, and nearly half are sold for more than asking price.
Bidding wars and price increases are typical. Buyers take greater risks, including forfeiting the right to leave without losing money if a home doesn’t value the price on offer or if an inspection reveals expensive repairs that need to be done. Many offer prices well above what the sellers ask for, and provide “love letters” and lavish gifts to make their offerings stand out. A buyer from New Jersey even offered a stay at his Caribbean villa with his offer.
How do ordinary mortals – who don’t have hundreds of thousands of dollars in cash – buy a home in this competitive market?
Broaden your search
Buyers who have been repeatedly kicked out find they need more savings or fewer waits, Vidana said. Home hunters unable to pay more should consider expanding their search area or opting for neglected properties.
In the past six months, her clients Matt and Hailey Melott have lost deals on 10 homes. Every time the couple, who spent dear The more affordable San Jose, Calif., Mesa, Arizona, fell short of other buyers who bid at least 10% off the list price and made all-cash offers with no surprises.
“We got to the point where we were bidding $ 450,000 on homes listed at $ 400,000, forgoing inspection and appraisal and still losing,” said Matt Melott. “We felt so hopeless. Either you have money in this market or you don’t. “
After months of constantly hitting the “Refresh” button on real estate search sites Melott, one house caught his eye. It had been on the market for 16 days – an eternity in the areas it roamed. It was priced in their range, but located in an area of more expensive homes that they hadn’t looked for.
“We were trying to figure out what was wrong,” Melott said.
The 1,800-square-foot three-bedroom home with pool had dated interior, but ticked all of their boxes. Better yet, there wasn’t a horde of buyers competing for it.
The Melotts offered the list price of $ 436,000, their offer was accepted, and the house was appraised at that price.
“We are completely stunned,” he said. “We have everything on our list. “
Take risks you can manage
While all buyers need sufficient funds, forgoing traditional contingencies – like an inspection, appraisal, or the sale of a current home – can help make an offer more attractive. But that does mean buyers should be prepared to cover any additional expenses that might arise, said Joseph M. Palmisano, a management broker at Better Homes and Gardens in Concord, New Hampshire.
For example, if you choose to make your offering more competitive by forgoing your inspection, you may have to pay for a new water heater or roof repair, he said. If the rating is lower than what you offered, you may need to fill the gap out of your pocket.
After a year of sharing an office while working from home, Nina Osegueda and William Austin decided to sell their condo in Herndon, Virginia, and buy a larger house in nearby Manassas. They were hoping to make a standard offer with financing and an inspection that would depend on the sale of their condo.
“But no one accepted our possibility of selling,” Osegueda said. “Everything was rejected. People offered no contingency, no inspection, 10-20% more than the asking price. “
So they changed gears, selling the condo first, which put them in a riskier, but more competitive position.
Their condo sold out within days before it even hit the market, and they agreed they could rent it out to the buyer for two months while they scrambled to buy a new home.
They made a more aggressive offer on a three-bedroom townhouse, giving sellers 12 hours to accept an offer of $ 10,000 above the list price of $ 360,000 and forgoing the inspection and inspection. ‘Evaluation. They risked losing the money they had posted as a bond by forgoing the appraisal, and took a calculated risk of forgoing the inspection since it was a relatively new house. The offer was accepted.
“But it was a big adjustment,” she said. “We’ve gone from thinking that we could negotiate a price based on the sale of our condo to realizing that we just need to make sure we have the money to fix the house because we’re forgoing an inspection. “
Erin and Kevin Lu also found the buying process to be a much different experience than they expected. They wanted to buy their first home while interest rates were still low, and they had a deadline to exit their rental and enter their first home: their son was due to arrive in April. They made an offer on a house in Phoenix listed at $ 299,000 by offering $ 310,000.
Not only did they outbid $ 40,000 with an all-cash bid, they said, but of the 10 bids on the house, five were all-cash. In addition, they learned that the winning buyer let the seller live in the house for six months.
“There’s no way we can compete with that,” said Kevin Lu. “We can’t buy with cash and we need a place to live. “
To their amazement, they got the second house they bid on. This time, they started with a more competitive offer, ranging from $ 20,000 on a home listed at $ 295,000. They have also given up on more contingencies.
“Giving up the appraisal was very risky,” said Erin Lu. “We wondered what was worth for a house? How much are we prepared to use up our emergency savings fund? We had to be prepared to waste our serious money. We decided to take the risk. “
They did an inspection, but waived issues that cost less than $ 500. The roof was repaired by the seller and the termite problem was solved by the Lus.
“We had to take risks or we couldn’t compete,” Kevin said.
Offer something valuable to the seller
Even though the National Association of Realtors has issued advice that so-called “love letters” to the seller may violate the law on fair housing, personal letters, or additional gifts, as well as compelling offers, are always noticed.
A couple did this by bidding on a five-bedroom house in Rumson, New Jersey, which was listed for $ 1.5 million. The buyers made a solid offer with no surprises that was $ 50,000 above the asking price, said Corinne McCormack, a Weichert agent who represented the buyers.
But they feared that still wasn’t enough.
Buyers had come to understand that sellers lived part-time in the Caribbean and believed that an offer of free stay in their rental accommodation might be attractive. So they wrote a letter to the seller to talk about their mutual love of life by the water and offered a stay at their villa in Saint John in the US Virgin Islands. It worked.
Unless you add luxurious extras, sometimes the terms of sale can be just as appealing to a seller as a higher price. For example, giving a salesperson more time to move.
“The genius that is often missing is trying to figure out what a salesperson wants,” Palmisano said. “Every seller wants more money, but in this seller’s market, a lot of sellers are buyers too and they want to rent out their homes until they can move into their next home. “
He had a seller who accepted an offer from a buyer that would allow the seller to live in the guesthouse for a few months.
“You think the salesperson is king,” he says. “But that’s what a seller is willing to do in this market because he will be a long time round. ”