The Most Trying Aspect of Real Estate is now:
[See the second guy going off the cliff? He wanted their high-end curtains and riding mower]
Buying a home… or at least, trying to. Fulfillment of the American Dream, due to disappointing lack of inventory, for many consumers stretches into months of losing multiple-bid situations. Hope is not lost but don’t be a lemming of a buyer!
Unfortunately, I am but a simple Realtor® with some modicum of experience in the market, and a half-decent conceptual understanding of what causes these trends, and how to hopefully mitigate them to net a positive result. I am sadly not Janet Yellen, Mnuchin, or someone they would even listen to. Most people I talk to don’t want to discuss quantitative easing at the FED over a cocktail.
There is a slew of variables that affect interest rates and a multitude of factors that drive the housing market. They are reasonably identifiable, occasionally discussed via the news and most of us should be familiar with at least some… They are: money-supply, international borrowing and it’s flux on our bond market, the LIBOR, good jobs reports, consumer confidence, Wall Street behaving itself, and no looming catastrophes on the horizon. All things are coming up roses, right? Righto!
Well then, forgive my consternation, but why?!? are we faced with April 1st inventory of 21 properties in one of Worcester’s strongest SFH price-bands $275,000 to $325,000. That will get you a generally lovely middle-class home in our fair city and give you a good shake at life. But yet there they are… 21 properties currently on the market. Out of those 21 more than a half-dozen just had open houses this weekend, (yeah yeah, I was inordinately busy) and others had price-drops. Based on past market activity, there should be less than 12 or so houses left in the next week or so in that bracket.
“So Allen, what’s the big deal then? What’s going on?” Well, I’ll tell you as best I can. Maybe someday when I get back to Sloan, get my MBA and chat with Daron over a Sunday tea and he lays it all out for me 20,000 feet down I’ll elaborate here with more profundity. This situation we find ourselves in is explainable by simple supply & demand economics. The housing market has the ability to vastly imbalance itself over consumer driven engagement, or in this case, disengagement on the part of sellers. New construction is slow to keep pace with buyer demand and in that existing housing stock numbers aren’t bolstering the market.
So in essence, what we have is a multitude of latter millennial buyers looking to engage. They have cast-off that old albatross, student loan debt, from their neck. They are promoted, positioned, and eager. Some have earned an advanced degree on the company’s dime, and now occupy a corner office. They are our next 5-7 years of home-buyers and they are savvy, resolute and knocking on the door. Why do we hold them at bay? Because the seller, comfortable in their home, has a different set of circumstances and does not want step out of comfort to enter the buyer-pool and try to find something that meets their needs in an unbalanced market. These are senior (experienced) homeowners and they have seen this before, and they will ride it out until inventory is more balanced.
Most obviously our solution would be to cajole people into listing their houses. We’re all working on that, believe me. That aside, the positioning of yourself as a strong buyer, a real contender, that will win takes multiple-spinning plates in the air and partnering with a highly competent Realtor®. Sadly, some will just not win for a while, due to financing constraints, limited cash-on-hand, marginal credit, or worse than all of the above – their inability to get out of their own way.
The blogs these days tend to talk about “creating the best picture of yourself as a buyer.” I just read one particularly unhelpful article on a colleagues proto-blog titled “Know What You can Spend.” Step back! that is a sparkling bit of wisdom hitherto unheard in our time!
“No! We are savvy consumers. We know what we can spend, now tell us how to win!”
There’s ways to win: however, in their entirety not all will be readily applicable across the board for everyone, nothing ever is.
In no prescribed order:
- Contingencies – in a normal market you can ask for silly things… here, do not. Just get the house, free of material defects within range of fair market value and be happy.
- Appraisal – step out on a limb, a well constructed limb, if you have the financial capability. Homebuyers today are waiving a portion of their appraisal contingency, or the entirety of it. For example, house is listed at $399,500 and we know it will go to $420’s… Waive your appraisal contingency to $400,000 (asking price) to give yourself some protection and better yet a competitive edge.
- Beyond knowing what you can spend, get all your ducks in a row! This means meeting with your relatively LOCAL mortgage-broker (don’t use some big cumbersome bank) and provide everything said broker and underwriters ask for STAT!
- Terms – Let’s be quick and fluid here. Time is of the essence particularly in multiple offer situations. The nonsense they’ve been experiencing in Boston for years, where Open Houses turn into 2-3 subtle home-inspections going on at once is migrating toward Worcester. Hit the house at least 2-3x before offers are called for – bring along a plumber, electrician, etc – anyone to look at anything you might have concerns with. In a multiple offer situation there will be very little wiggle-room post-inspection and you’ll need to be sure that you’re buying this house. Inspections should be done in 5-7 days tops, and people love seeing a P&S in 10 days of acceptance.
- Financing: Did you know that there are lenders that can issue an upfront commitment? If you get everything into them, ahh…upfront. I have a speedy lender that can provide you a 21 day closing time from acceptance of offer. Thats huge! Talk about a competitive edge up against other buyers that might not even have all their docs into a lender. Yikes to those poor folks you’re up against with that power. Furthermore, back to our old friend Mr. Appraisal. Some lenders now are waiving the need for an appraisal in situations where buyers are putting a large-amount of cash down on the property (in range of 33%-45% or so.)
- Letters: The sellers while wanting to make a wise and profitable financial are human-beings. I believe in the decency of people despite what we see on TV every day. It’s why they get offended when you send them a litany of crazy requests and fixes. Perhaps not easily as offended, they are susceptible to heartwarming stories. They don’t want to read your bio and how this house “speaks to you.” They want to know if you have a real need for the property, “It’s a ranch, the only ranch in this area, that could be ADA capable and I have a handicapped person living in our home and we *need* this property.” If you have an example that rings true, is provocative or heartwarming send a letter with your agents input. Don’t pull out the trials and tribulations of George Costanza; that will backfire.
All in all, there’s plenty of ebb & flow in our marketplace to win a property. Position yourself the best financially, minimize demands, think outside the box and work with top-notch people that flow organically, in the search process and in a transaction, moving pieces and ensuring you stay ahead of the curve.
Best Wishes for Spring! While you’re out there house-hunting we will be here, cajoling sellers into listing to right-size their living for 2018 so that we may all enjoy a wonderful year.
Thanks for reading!