Much has been said about the strong Seller’s Market that ramped up during the pandemic. With historically low interest rates, millennials looking to buy their first home, and people relocating based on quality of life rather than proximity to work, demand has been through the roof for homes in virtually every corner of the country. And supply simply hasn’t kept up. New construction slowed after the housing crash of 2008, and the resale market just hasn’t had the inventory, with potential Sellers not knowing where they’d go even if they can get top dollar for their home.
At one point, demand for homes outpaced supply to the tune of 4 million homes. While new housing starts have picked up a bit of speed, delays and higher prices due to securing raw materials (lumber) have continued to add to the challenging market for Buyers. And the competition for resale homes has continued to be fierce.
So what’s a Buyer to do?
First off, working with an experienced, proactive, and energetic Realtor is key. You’ll want a partner who will be your advocate, whether looking at new construction or competing against multiple offers on a resale home. It may take looking at dozens of homes — and putting offers on more than a few — before the stars align. Even Buyers with deep pockets can be repeatedly outbid.
The good news is that we’ve started to see a bit of cooling, as some Buyers decide to “wait it out” a bit. While no experts we’ve talked to expect home prices to decline, there is hope inventory will increase a bit, helping to make things a bit less competitive.
There are also a key handful of strategies Buyers can employ.
1.) Be open minded: You may want to consider areas slightly outside you initial geographic search. One of our clients recently ended up getting under contract on a gorgeous home on several acres of property — just over the border from the county they were searching in. It wasn’t initially on their radar, but an Open House at this property piqued their interest, and it ended up being their dream home.
2.) Be ready to visit a new listing as soon as it goes on the market. Some properties go under contract in the first day or two, so if you wait until Saturday or Sunday for a showing, you may miss your opportunity. A good Realtor will call the Listing Agent to find out the situation (i.e. whether or not the Seller is planning to entertain strong early offers or whether they are insistent on waiting until a full weekend of showings is complete). That way, you can hone your strategy if you’re looking to make an offer.
3.) Put as much money down as you can afford to, and offer a robust Earnest Money Deposit (EMD). This shows you are financially sound and not planning to walk away from the deal (because you’d lose your large EMD).
4.) Consider a Void Only inspection — or even a “walk and talk” inspection. Right now, traditional inspections are rare in this multiple offer environment. If you submit an offer contingent on a traditional inspection, you’ll likely be up against other offers that have completely waived this contingency.
You may still be competitive with a Void Only inspection, and this would be another reason to work with a proactive Realtor who will be able to read the market and openly communicate with the Listing Agent to assess the competitive situation. A Void Only inspection allows a Buyer to have a full, traditional inspection. However, rather than deliver a list of requested repairs, the Buyer either moves forward with the purchase of the home OR they can void the deal (and get their earnest money deposit back) if they find anything that makes them uncomfortable proceeding with the purchase of the home.
This gives the Buyer protection, while preventing the Seller from having to work through a “honey do” list of minor repairs. If a Buyer and their Agent feel right away that a home is going to be particular competitive in terms of the number of offers, they can employ an alternative approach and take an inspector with them to the showing for what’s known as a “walk and talk” inspection.
Even though showings are usually limited to 30 minutes (and sometimes less!), an inspector can focus on giving the roof, windows, foundation, and systems of the home (HVAC, plumbing, electrical) a quick look while the Buyer focuses on the lot, floor plan, and aesthetics. It’s cheaper and quicker (and makes you more competitive) than a full inspection or even a “Void Only” inspection, but the hope is that a good inspector may spot “red flags.”
5.) Work with a top-notch local lender like the one we always recommend to clients. This is one of the key advantages many Buyers miss. Why is the lender so important? Well, first off, if you have a local lender, they will likely be reachable every day, including on critical weekend days and after business hours, when you are potentially going to be submitting offers.
Even if you, as a Buyer, are already pre-approved for a mortgage (essential in this market), it’s nice to get a pre-approval letter generated that is specific to the property you’re submitting an offer on. Even more importantly, a responsive lender will be proactive and call the Listing Agent to vouch for their Buyer client and answer any questions once they’ve submitted an offer. Most lenders don’t do this, because they aren’t even always reachable over the weekend) so it sets these Buyers apart from the start.
Listing Agents and Sellers want to know that, once they ratify a contract, that there won’t be any problems with the Buyer lining up the financing by the deadline. Large, national lenders are harder to reach by phone, especially at off hours, and Buyers may find they aren’t even able to speak to the same person each time they call. These high-volume lenders often sacrifice the all-important personal relationships that can make a huge difference in both getting under contract — and proceeding with a seamless, low-stress contract to close phase.
It’s also worth mentioning that local lenders have their reputation on the line, delivering the best in service for they are in which they serve. They don’t just disappear after the transaction. They are invested in the community as a whole and are usually more diligent than the “big box” lenders.
The local lender we work with sometimes even has the ability to waive the need for an appraisal, depending on the particular home and the amount of the down payment offered by the Buyer. That gives Buyers a HUGE advantage against other offers, because whether the home appraises or not is not even an issue…since an appraisal won’t even be done. Sellers love this. In fact, it even trumps offers that waive the appraisal contingency (a fine point, but a Buyer can waive the appraisal contingency but then be stuck covering an appraisal shortfall with cash, and Sellers get nervous about whether the Buyer will back out and give up their EMD rather than have to put a lot more cash to make up for an appraisal shortfall). Again, if the lender themselves waives the need for an appraisal entirely, this isn’t an issue.
As you can see, getting under contract on your dream home is MUCH more complex than simply offering the most money. It’s about presenting an offer in which ALL the terms work together to assure the Seller there’s a high chance of getting to the closing table. Please let us know if we can help put YOU in the best position to be the one with the winning offer. We’d love to work with you!