There is no doubt the real estate market is booming. No longer tethered to a workplace, many are choosing to leave the cities and head to the burbs. This has put an incredibly high demand on the pre-existing low-inventory of homes nationwide in our surban and suburban areas.
Per the supply and demand principle, prices of homes have escalated tremendously. It’s made for a very competitive market for buyers where multiple offers are the norm. Many issues surface in such a robust and “inflamed” market and ones that I like to keep all my buyers and sellers cognizant of. Here are a few to keep in your buying/selling headspace.
1. Low inventory/Multiple offers–
A seller’s market is likely to continue for the foreseeable future especially in the suburbs and in states featuring coastline or mountains. Areas that boast outdoor amenities are now on many- a-buyer “hot list.” I heard on a recent podcast that the “flyover states” have now become the “fly- to states.” What this all means is that when a house hits, you as a buyer need to be ready to pounce. Multiple offers are the new normal and learning how to create competitive offers via escalator addendums and waiving some contingencies are areas buyers must be educated in.
2 . The market will NOT pay top dollar for overpriced or dated homes.
Despite the seller’s market one can not throw a listing up there like spaghetti to a wall, with little market prep and/or a high price tag. It simply won’t sell. Buyers are NOT jumping on these homes no matter how “desperate” they are for inventory. If it’s priced too high or the condition is perceived as poor (ie dated and or cluttered) it simply will not sell. There are simply too many properties that HAVE been updated and that have been prepped impeccably, staged well etc for buyers to choose from. The real estate market is like a beauty pageant where pretty really does sell and it sells well.
3. Transactions will become more accelerated.
Loans and closings took much longer during the beginning of the pandemic. Addendums were developed for unforeseen delays yet somehow along the way everyone found out how to make the process faster and more efficient. What that means for a buyer is that the ability to go out and look at 15 plus homes has waned. There are simply too many buyers out there surfing online for weeks prior who are ready to see a home and then make an offer. This is now a market where willing and able buyers are out making offers daily.
4. Leaseback options
The more flexible a buyer is, the stronger an offer appears. So many times it’s not the offer price that wins the multiple offer contest but it’s the one with the fewest contingencies and the most flexibility with closing dates and occupancy. Buyers who can offer sellers the ability to stay in their homes after closing for a specified period of time may have an advantage over a buyer who needs to move in right after closing.
5. Appraised values may become increasingly challenged.
Median sale prices are up 8- 41% in towns across Rhode Island versus where they were a year ago. With that comes the risk that an appraisal comes in below the contract sales price, especially where properties are going well over asking prices. As an agent, I always give my sellers and buyers a big ‘Appraisal 101″ where I inform them that an appraisal is simply one person’s opinion of value and it may not be the market value and/or the price that the buyer and seller agreed to. If an appraisal contingency is waived by the buyer to add great strength to the offer, then the buyer will be forced to put down more money to make up for the difference. Tactics can be taken on behalf of the buyer to provide an element of compromise, where the buyer will agree to come up with x amount of the asking price, or something to that effect but “what if” plans need to be discussed early on in the offer process. Some buyers may not be able to come up with the out of pocket money needed to pay the difference and that needs to be discussed with their realtor before an offer is made. Likewise, sellers need to be advised on what the repercussions are when an appraisal comes in under the sales contract price.
Bottom line is that the market is hot and buyers and sellers need to be well informed, educated and prepared for anything and everything that MAY come their way. As a former teacher, I pride myself on my value proposition which rests heavily on knowledge and guidance every step of the way.