With mortgage rates falling below 3 percent for the first time in five decades, would-be homebuyers are chomping at the bit to get out there and find new places. But when they finally do jump off the sidelines, they’re likely to find slim pickings.
At the current sales pace, for example, Austin, Texas, had less than two months’ worth of houses on the market at the end of May, according to Texas A&M’s Real Estate Center. And despite a slight pickup in new listings in Northern Virginia in June, active listings were still down nearly 33 percent from the same month a year ago.
Nationally, according to the National Association of Realtors, inventory was off almost 19 percent in May. But Redfin said active listings are down 27 percent from a year ago in the markets its agents work. And as of mid-July, Realtor.com, NAR’s official listing site, showed inventory down 32 percent from the same time in 2019.
“Homebuyers are frustrated because they’re just not seeing a lot they want to buy,” said Irma Jalifi, a Redfin agent in Houston, who recently had two clients throw up their hands in disgust and stop looking.
Chris Ann Cleland with Long and Foster has found the same.
“The level of frustration” for buyers in her Virginia market is “through the roof,” she said.
The natural result from all this? Bidding wars, where buyers compete for the few house that are left for sale.
“So many buyers for every listing that comes up on the market means that there are often five or more buyers knocking each other out to win the home,” said Cleland.
Clever Real Estate, a buyer-agent matching service, said that since the pandemic began, 43 percent of all buyers have had competition. Of those, 18 percent had lost out on at least one house before finding another.
Given those odds, what can a buyer do to gain a competitive advantage?
No Strings Attached
No strings attached. If cleanliness is next to godliness, then a “clean” offer is godlike in the eyes of sellers. So remove every contingency you can possibly live without. Conditioning the deal on the sale of your current house, for example, is the kiss of death.
If you feel confident enough, you can even waive the appraisal contingency. But realize that without that protection, if the valuation comes in low, you’ll have to make up the difference in cash between the agreed-upon selling price and the appraised value.
Agents have differing opinions on waiving the inspection clause. Some think it’s OK, but others say it’s too dangerous. It’s your choice. But if you want an inspection, line up your inspector in advance and offer to get it done fast – say, in five days instead of the usual 10 – so the house isn’t off the market too long.
Another possibility: Agree that only major problems – roof issues, for example, or faulty HVAC syetems – would be deal-breakers. This eliminates raising the red flag over minor issues such as sticky sliding glass doors.
Speed Is Critical
Offer to take the place “as-is.” You can still stipulate that you want the place inspected, and cancel the deal if the exam uncovers something major you find unacceptable. But other than that, once the inspection period expires, you’re all-in.
Some sellers want out as soon as humanly possible, so offer to close quickly, perhaps within 24 hours. Of course, that’s not possible; it takes several days to prepare the closing papers. But the offer to settle the next day tells the seller you’re ready to go.
A quick close is “worth money and peace of mind” to many sellers, said Linda Walters of Sage Realty in Pennsylvania.
“Lengthy contract periods tend to make sellers nervous, since their period of risk is longer,” said Ed Corbett of Keller Williams Realty in Atlanta.
Other sellers might have a much longer time frame in mind. If that’s the case, instead of a quick deal, offer to hold off the closing for 90 days instead of the usual 30 or 45.
- Think big. A typical earnest money deposit is 1 percent of the purchase price, so offer more. This gets the sellers’ attention, shows them you have the financial wherewithal to follow through and demonstrates that you are serious. Or make the deposit nonrefundable – but applicable to the purchase price – after the inspection period expires.
- Back at ya. To make their move less stressful, offer to allow the sellers to stay on after the closing. You can charge them rent, perhaps based on a percentage of your house payment. If you are really feeling magnanimous, let them stay for free to clean up loose ends for 30 days or so.
- Pay to play. Offer to pay some of the seller’s moving expenses. If it’s a vacation house, offer to allow the sellers to come back and use their former vacation property at predetermined times every year.
- Hang tough. If your contract isn’t accepted, ask to remain as a backup in case the other deal falls through. More than 1 in 4 contracts fail to close, so yours could be next in line.
Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at firstname.lastname@example.org.