Buyers in Need of Closing Cost Help Are Getting Shoved Out of the Market
Last year (2020) Bristow and Gainesville buyers in were still able to be successful among their competition of multiple offers with closing cost contribution requests from the seller. This was true in all price ranges, as multiple offer situations consisted of a few offers, if that. As the year moved on, however, multiple offer scenarios started to grow out of control. A dozen offers on a townhouse was not unusual. Four offers on a single family home was common.
Wrapping up last year and entering this year and it is all out madness. My first encounter with all out madness was with first time buyers in December, making an offer on an outdated single family home in Bristow. At the time, it may have been the only home on the market in Bristow in that price range. What I didn’t expect was for my buyers to be the thirty-first offer among fifty–five. And that home sold for over ten percent more than it’s list price!
My first listing side experience with the all out madness was with a $635,000 home I listed in Gainesville. Comparable sales supported our list price, but not much higher. Twenty-six offers later, it sold for $676,000. Not only were closing cost help requests not present, but a small percentage of buyers were waiving every contingency. That scenario repeated in two more listings. Yet, despite the intensely serious buyers, there are still some asking for closing cost help or coming in with otherwise undesirable terms.
If you are in the market to buy right now, here are some bullet points you need to know:
- Closing cost help is becoming extinct. If you can’t afford to pay your own closing costs, save up or talk to your lender about financing them into your loan.
- Have a home you need to sell before you buy? Ask for post settlement occupancy from your buyer. The max they can give you is sixty days if they have a mortgage. Use THAT period to house hunt and be prepared to find temporary housing. A home sale contingency, or settlement of buyer’s home contingency is simply an added layer of risk sellers don’t need to take in a market with buyers dropping as many contingencies as possible.
- Show your level of seriousness with a high earnest money deposit (EMD.) EMDs are only liquidated to the seller if you default. An EMD of $12,000 on a townhouse priced at $400,000 says, “I have no intention of losing this money.”
- Be prepared to offer over list price and be prepared to tell a seller, in your offer, exactly how far over a low appraised value you are willing to pay.
- Home inspection contingencies with the right to ask for repairs is another contract clause becoming extinct in our market. Even right to void only inspections are getting left behind for buyers that are willing to do inspections for informational purposes only. This is a tougher one and really depends on the property, but talk to your agent about what is most competitive and still comfortable for you.
- Radon inspections are a no go. Know up front the cost of a radon remediation is about $1,000-$1,200 dollars. If you can afford the fix, don’t add another contingency. If you can’t, save up a little more until you can.
- Who you work with as a lender is very important. A local lender who specializes and prioritizes purchases over refinances is key to a faster closing. Credit unions are not advised. In their world, every loan gets on an assembly line regardless of whether they are purchase or refinance. This leads to delays and can put you at risk of default.
The current market is not impossible, but it is very difficult to navigate if you aren’t working with an experienced, full-time agent who is seeing the shifts in conditions as they happen. Pick a busy agent who knows the market. They know the conditions.
How Long Does it Take to Tour a Home?
If you are a first time home buyer, you may wonder how much time it takes to tour a home. Really, it depends on two things:
- Your level of interest in the home
- The size of the property
If you don’t like a home in the first few minutes, the tour may only take ten minutes, if that. It may take twenty to thirty minutes to tour an average sized Bristow or Gainesville townhouse, when you are interested and checking things out. By contrast, forty-five minutes in a four bedroom single family home with three finished levels seems to be the right amount of time for an interested buyer. Add in a pandemic and many sellers not wanting to allow overlapping showings, and sometimes you are touring a single family home in fifteen minutes. That’s because that is the only time frame available, or the listing agent is only allowing fifteen minute showings to let in as many buyers as possible.
I have been known to book two back to back fifteen minute showing times to accommodate my buyers. Sometimes, I don’t have a choice and my buyers just have to roll with a fifteen minute showing window. You do what you have to do to see a home these days.
What is crazy is to think that you probably spend more time grocery shopping. You definitely spend more time picking out a new car. And I know the ladies out there can spend hours shopping for the perfect outfit for a special event. Why does a house tour take so little time?
Being in a home the major things buyers look for is the feel of the layout. Does the floor plan work for their daily lives and have the space they need? They look at the privacy of the lot and determine if it is satisfactory. Are the finishes pleasing? The reality is that, by the time a buyer is touring a home, location has been determined along with some key components the buyers want or need.
The home inspection, which takes anywhere from two to four hours depending on the size of the home and the process of the individual inspector, is where buyers really get an in-depth look at the home they are purchasing. Unfortunately, in the 2021 seller’s market, many buyers are having to forego a home inspection just to get under contract. That’s frightening, since this is when buyers get the “test drive,” so to speak.
If you are looking to purchase in Gainesville, Bristow or the surrounding areas this year, make sure you have a full-time, experienced professional looking out for your best interests. It’s a tough market with a lot of potential pitfalls. Representation is the only way to go.
Are Buyers Over Paying for Houses Right Now?
In the Bristow/Gainesville first quarter real estate market of 2021, we’re picking up where 2020 left off. Sellers are in the driver’s seat due to extremely low inventory and intense buyer demand. In fact, it’s crazier right now than it was in 2020.
A townhouse or single family home can sell for well above a reasonable list price after dozens of offers. Sadly, some listing agents are advising sellers to under price homes to open the market up to more buyers. The reality of that move is not good. You just disappoint those buyers in lower price ranges.
Buyers tend to get list prices stuck in their heads as absolutes. Sort of like buying something off the shelf at Target. It says the price is this, so that’s the price. Not in house hunting. It’s more like an eBay auction for a hard to find item around the holidays. The bidding between interested buyers can drastically increase the price.
Does that mean that buyers are over paying for homes right now? Considering that the sale of every home becomes the most recent comparable sale for other homes in the neighborhood, no. There is no such thing as over paying in this market. Just like there is no such thing as a “deal.” You get something below market value, well, your sale just affected market value and brought down neighborhood values. It’s all relative and no real estate sale occurs in a bubble.
Do buyers need to be concerned about prices coming down in the future? I don’t know if they need to be concerned about it, but prices don’t always go up. What goes up, must come down. There are always options available if you find yourself upside down and unable to sell in five years or more. At today’s super low interest rates, most mortgage payments can be easily covered by the going monthly rental rates. And of course, higher down payment buyers may never been upside down.
The reason to buy a home is stability and control over your living situation. Yes, your home is a investment as well. Sometimes, however, the money you make is money saved on taxes due to the mortgage interest deduction. Or not having to spend money moving every year or two because you landlord is not renewing your lease.
Want to discuss a purchase in the 2021 market and how it may affect you in the future? Get in touch with me and let’s see if a purchase now makes sense for you.