Crazy Real Estate Market 2021
by Manny & Michelle Huertas / The Huertas Group 3/27/2021
By now we are sure you have heard the news about the insanely low interest rates and how they have contributed to a home buying frenzy. The market is hot, and we have seen things that we have never seen before in this market. If you have been thinking about buying or selling a home, read this article for a few highlights on this crazy market and some of the common things we have noticed in offers to help you compete.
Low inventory
Contributing factors as follow:
- Foreclosure Moratorium: Homes that would typically be available in the open market are currently held due to the moratorium in place which means that direct mortgage servicers are required to halt all new foreclosure actions and suspend any that are in progress for federally backed properties. It also stops evictions from these properties.
- Sellers are waiting: Some sellers believe that they can get more money for their homes if they wait for prices to continue to climb.
- Low interest rates: The low interest rates have drawn plenty of interest from buyers & the competition is stiff. Many open houses have lines that wrap around the bend & properties are going under contract in as little as 24 hours.
- COVID-19 Pandemic: Since the pandemic, people are now working from home and their kids are home schooling. Many consumers feel they need a bigger space since they are spending more time at home and want more rooms, bigger backyards, etc. Cabin fever is real!
Over-priced homes
Contributing factors as follow:
- Low inventory: Homes are going under contract sight unseen and some cases selling in as low as 24 hours therefore driving the prices through the roof.
- Stiff competition: We are seeing multiple offers and the prices are rising incredibly. In some case, we have seen offer prices in upwards of $20K to $100K and over asking price.
- New home builders: The price of lumber and building materials has increased so we are seeing builders charging more over asking even if you are under contract. We highly recommend seeing a real estate attorney if you are building through a builder.
- Investors: Even investors are paying above asking price and therefore flipping opportunities are not readily available as in previous markets. They are purchasing, holding and in some cases renting out the properties as opposed to selling right away.
Common things that are now included in offers:
Common items included in offers below:
- Cash is king: Although cash offers usually win, please expect to pay listing price and above. The days of low balling are pretty much over in this market. You offer may be overlooked if you decide to lowball.
- Financing: Conventional loans are in 2nd place, VA/FHA loans are in 3rd place and in some cases being overlooked due to their stricter guidelines. Make sure your offer is attractive from the start.
- Down Payments: Larger down payments may be required to make your offer attractive.
- Closing Dates: Earlier closings may be requested & can help your offer be more attractive to the seller/s.
- Sale Contingent to Seller Finding Home: In this market, it is becoming more commonplace that the sale is contingent to the seller finding a new home due to the low inventory.
- Submitting DU: Typically, pre-approvals suffice when submitting offers however, in this market, buyers are providing a DU (desktop underwriter) which is a step beyond the pre-approval to make their offer more attractive.
- Appraisal Contingency Waived: If financing, you may be asked to waive your appraisal contingency which means you MUST bring the difference of financed amount and/or offer accepted amount even if the appraisal comes in lower.
- No Buyer Concessions: Most sellers are not paying buyer concessions on the contrary, buyers are offering lease backs, paying sellers closing costs and/or all agent commissions.
- Inspection Contingency Waived: Inspections are being waived or a shorter inspection period requested. Also, most sellers are not offering credits to fix any items in the home.
Other factors:
- Listing Agents are bombarded: With multiple offers and showings requested, securing an appointment has become a bit more difficult for buyers but not impossible. Patience is key!
- Lenders/Title companies: Due to the low rates, mortgage lenders & title companies are also swamped, so please be patient.
- Sellers, please keep in mind: If you are thinking of listing your home and need the proceeds of the sale to move on to your next adventure, please keep in mind the points we covered about purchasing a home.
- Buyers, please keep in mind: If you are in the market to purchase a home now and are comfortable with the current conditions of this market, remember that if you are on a lease, you may have to go month-to-month on your lease to accommodate the seller should there be a lease back option or sale contingent to seller finding new home.