When a seller signs a contract with a buyer, they want to be as certain as possible that the contract will proceed to settlement.

The king of all offers, providing the most certainty to a seller would be a cash offer with no contingencies whatsoever.

As each of the contingencies below are added to a contract, the seller's certainty decreases...

Here are the three sequences I see buyers follow most frequently....

As Late As Possible

• Guess at what you can buy using online mortgage calculators.
• Start viewing houses.
• Make an offer.
• Ratify a contract to purchase a home.
• Start talking to several lenders.
• Select a lender.
• Become pre-qualified.
• Make loan application.
  
• Provide income and tax documents (etc.) to lender.
• Obtain loan approval.
  

Incredibly Proactive

• Start talking to several lenders.
• Select a lender.
• Become pre-qualified.
• Make loan application.
  
• Provide income and tax documents (etc.) to lender.
• Obtain loan pre-approval.
• Start viewing houses.
• Make an offer.
• Ratify a contract to purchase a home.

A Reasonable Middle Ground

• Start talking to several lenders.
• Select a lender.
• Become pre-qualified.
• Start viewing houses.
• Make an offer.
• Ratify a contract to purchase a home.
• Make loan application.
• Provide income and tax documents (etc.) to lender.
• Obtain loan approval.

I try to encourage all of my clients to at least be in the "reasonable middle ground" sequence as outlined above.  This gives them a firm idea of what they can afford and how a home price will compare to a loan payment.  This also allows them to make a stronger offer, already having a pre-qualification letter in hand.

I strongly discourage my clients from following the "as late as possible" sequence as outlined above.  This doesn't help them make the best decisions about which houses to pursue, how far to negotiate, etc.  This also doesn't allow us to make as strong of an offer on a house.

Occasionally, one of my clients will fall into the "incredible proactive" sequence as outlined above, and wow, this makes the financing process a joy to work through!  These buyers have already done so much of their work with the lender before even thinking about which house to buy -- which then allows them to focus on buying, negotiating, inspecting, etc., rather than be bogged down in the process of securing their mortgage.

The answer to this question - will a house sell for more than its asking price - does not just relate to how the asking price compares to the market value of the home.

Certainly, if a house is priced too low, or even priced fairly in a competitive market, that will increase the likelihood that it will sell above the asking price...

[1] A house worth $350K, listed for $330K, will almost certainly sell for more than the asking price.

[2] A house worth $350K, listed for $350K, is likely to sell for more than the asking price in the current market.

... but there are other factors that affect this as well.

[1] How many buyers have viewed the home?

As the number of showings increases, the likelihood of a house selling for more than the asking price also increases.

[2] How many buyers have made an offer?

As the number of offers increases, the likelihood of a house selling for more than the asking price also increases.

All of this might seem pretty straightforward, but pause to reflect on these dynamics as you are considering an offer on a house recently listed for sale.

Consider these two fictional houses that came on the market (not really) yesterday, that we’re walking through today...

[1] House listed for $350K, with 18 showings and four offers thus far.

This house is very, very likely to sell for more than the asking price.  :-)

[2] House listed for $350K, with eight showings and one offer thus far.

This house might sell for more than the asking price - if another buyer jumps in and makes a second offer.

[2] House listed for $350K, with 12 showings and no offers.

This house could, possibly, sell for more than the asking price, but it is not seeming very likely given that lots of buyers have looked at it already and there aren’t any offers.

[3] House listed for $350K, with one showing and no offers.

This house is almost certainly not going to sell for more than the asking price - unless a bit more time passes and several buyers all of a sudden go see the house at the same time and make simultaneous offers and then have to compete with each other to buy the house.

So, to answer the question of whether a house is likely to sell for more than its asking price, we really need to start by asking how many showings a house has had and how many offers exist.
  

• The closing for both will be on the same day.  Let's say it's a Friday.
   
  
• You'll have to be out of your current house by the evening before closing (Thursday evening in this case) so that you can close on the sale of that house the following morning (Friday morning).
   
• You won't have access to the new house to move your belongings in until after you close on Friday afternoon.
   
  
• So, where are your belongings going to be from Thursday evening until Friday afternoon?  And where will you be?

• Work with a moving company that is willing/able to load you up one day and not unload you until the following day.
   
• Ask the buyer of your house if you can retain possession of the house for a day or two after closing to get things packed up and moved out after closing.
   
• Ask the seller of the house you are buying if you can have early possession of the house for a day or two before closing to get things moved in before closing.

 

If a buyer is buying a home priced over $400K or $500K, or even over $300K, the layout of the home becomes very important to them.  That is not to say that it is unimportant for a $200K buyer -- but someone buying a more expensive home oftentimes plans to stay in it for a longer time frame.

If not the #1 feedback, then perhaps the #2 feedback I receive from showings of homes priced over $400K is that the layout just didn't work for the buyers....

• They wanted another bedroom here, instead of there. 
   
  
• They wanted a more open floor plan. 
   
  
• They wanted more of a formal dining room. 
   
  
• They wanted a more spacious basement. 
   
  
• This room is a bit too big. 
   
  
• That room is a bit too small. 
   
  
• They don't like how close this room is (or is not) to that room. 
   
  
• And on and on.

Frustratingly, the layout is something that is hard (nearly impossible) for a seller to change in order to appeal to a wider segment of buyers.  Thus, if your home has a layout that continues to not work for buyer after buyer, you must either wait (and potentially wait and wait and wait) for the buyer who loves that layout -- or adjust the list price to make the house (even with its layout) more appealing to more buyers. 

 

1. Obtain a pre-approval letter from a lender.
    
2. View the property.
    
   
3. Ask follow up questions of seller.  (utility costs, age of house components, reasons for selling, motivation level, timing logistics)
    
   
4. Research comparable sales to determine market value.
    
5. Research restrictive covenants, deed restrictions, septic system details, survey, etc.
    
6. Discuss negotiation strategies.
    
7. Determine main terms of offer.  (price, timing, contingencies)
    
8. Draft and review offer documents.
    
9. Sign (in person or electronically) offer documents.
    
10. Submit offer documents to the seller and (patiently?) wait.
    

Let me know if you have questions about this process -- and know, of course, that the process looks slightly different for each buyer and for each property.  This is a general guide, but not a required list and sequence.

When we get to step seven, above, we will be discussing and deciding on the terms of the offer.  Below is a list of the main contract terms we will need to discuss in preparing to make an offer.

• Your Full Name:
  
• Your Current Address:
  
• Personal Property to Convey:
  
• Offering Price:
  
• Type of Financing: LTV: Rate Cap:
• Earnest Money Deposit:
• Request for Closing Cost Credit?
• Financing Deadline:
• Settlement Date:
• Home Inspection? Radon Inspection?
• Inspection Deadline:
• Do you want to purchase a home warranty?
• Other Terms?

When making our offer, it will be important to remember that there are a variety of terms that will be important to the seller - not just price, but also timing, contingencies, etc.
 
Before and after making an offer, there is a lot more to know about and think about regarding the home purchasing process.  Read more at....


 

If you plan to buy a home this fall -- but you already own a home, that you plan to sell -- then one of your first conversations should likely be with your favorite mortgage lender. 

It's a seller's market, after all, which means that...

[1]  When you are selling your home, you will likely find yourself able to negotiate favorable terms with most buyers making an offer on your home.

...but...

[2]  When you are making an offer to buy a home, the seller will likely have the upper hand in negotiations.

As such, if you are planning to make an offer to buy a house with any of these scenarios, you are unlikely to be successful...

So, if you want to have a fighting chance at buying a home right now, you will likely want to explore what it would look like to buy before (or independent of) selling your home.

Basically, will your lender allow you to buy a new home before selling your current home. 

If your lender says this is possible -- and if you are comfortable with it -- this will allow you to pursue houses that come on the market and make offers that are not contingent on the sale of your home.

But again, all of this starts with a conversation with your lender.  So, if you want to buy this fall, but will also need to sell, and you're not sure if you can buy before selling -- talk to a mortgage lender ASAP to find out!

If you need recommendations on some great mortgage lenders in this area, feel free to email me.

 

This house has soooo much of what I want in a new home...

...I mean -- it checks off almost all of the boxes...

...well, but, except for ___, and I did say that was pretty important...

...but there are so few options for buying right now...

...should I just go ahead and move forward with this mostly perfect house?

This is the conversation I have had went LOTS of buyers lately -- they have decided to buy, have seen so few options on the market, finally see a house that is reasonably close to what they want -- and they then need to decide whether that house is close enough.

It's a tough call with no one right answer!

How close to perfect do you need to get when shopping for a home in a market where there are very few listings on the market at any given time, and when houses often go under contract in days rather than weeks or months?

Will you be glad to finally have a contract on a house be done with the frantic search?

Are the areas in which the house misses the market for you critical areas or "nice to have, but not essential" areas?

Are the ways in which the house is not perfect changeable (condition, finishes) or unchangeable (location) in the future?

There is no easy answer -- but I'm happy to talk it all through with you when we find that house that is pretty darn close to what you want to buy -- but not quite perfect.

 

This stat (illustrated above) might surprise you.  It surprised me!

Thus far in 2021 there have been 379 sales of townhomes, duplexes and condos in Harrisonburg and Rockingham County as recorded in the HRAR MLS.  Of those 379 sales -- 35% of them have been new home sales!

I know there have been plenty of new home sales (particular of attached properties) in 2021, but I didn't think it was more than a third of all attached homes that are selling.

Here are some of the spots where we have seen the most sales of new townhomes, duplexes and condos thus far in 2021...

1. The roof is actively leaking.
2. The air conditioning system is not working at all.
3. One of the toilets wobbles a bit when rocked back and forth.
   
4. Two closet doors do not latch properly.
5. One of the bathroom sinks drains slowly.
6. The weather stripping at the back door is torn.
7. There are two small holes in the vinyl siding.

1. You risk the seller having knee-jerk reaction of thinking you are asking for too many small repairs and they could adopt a "take it or leave it" approach and refuse to make any repairs.
    
2. The seller might also say -- OK -- I'll address five out of seven of the issues -- the last five!  Here, they would seem to be responsive to your request, but would have missed the two most important (and most expensive) items on the list.

This is not a one-size-fits-all strategy, but I do urge you to carefully weight whether to ask for a home seller to make minor repairs if there are some major repairs that need to be addressed.

 

Here's a dynamic I've observed in our local market over the past six months or so...

There are plenty of large-ish detached homes (2500 - 4000 SF) in Harrisonburg and Rockingham County that are occupied by a parent or parents who have raised their families in those homes but now find themselves with a family sized home without any kids living at home any longer.

As you might expect, many of these homeowners would like to downsize.  They don't need 3000 or 3500 SF just for themselves and the few times a year when the kids (and possibly kids' families) are back home to visit.

But, sometimes downsizing is easier said than done...

This homeowner would likely prefer to move into a home that is perhaps 1400 to 2200 SF, depending on how much they want to downsize, and they would likely prefer a home that won't require a lot of maintenance over the coming five to ten years and a home that has everything they need on one floor.

There are only so many homes in this area that match this description, and they don't hit the market all that often -- and when they do, they usually sell quickly.

Below are some of the popular downsizing destinations where buyers often find themselves in or near Harrisonburg.  The links below will take you to a listing of recent sales in each area as this will show you some recent sales prices and because there aren't currently active listings in many of these locations.

Popular Downsizing Neighborhoods:

 

 

Many sellers, when receiving a cash offer and one with financing, ask themselves (or their agent) whether a cash offer is really that much better than one with financing.

As with many questions in real estate, it depends...

First, a $400K cash offer and a $400K offer with financing will both (any other contingencies aside) result in the same amount money going to the seller -- $400K less mortgage payoffs and transaction costs.

So, in that way, a cash offer and an offer with financing are pretty similar -- the seller gets the same amount of money.

These two offers, though, start to feel pretty different...

Let's say you just sold your house -- and you're wondering -- should you go ahead and buy the next house now?  Or wait a year?  After all, home values seem quite high right now -- maybe you'd be better off waiting a year?

Let's check -- from one very narrow scenario...

Mortgage Payment = $1,259 per month (2.78% mortgage)

$427 per month in principal reduction

$832 per month in interest, taxes and insurance

Yes, sometimes buyers these days are making offers on houses without a home inspection contingency.

As Paige asked yesterday...

Good question, Paige!  :-)

Here are some of the reasons why buyers are making offers without home inspection contingencies...

I've seen buyers use this strategy quite a few times lately... and sellers usually aren't interested, or fooled, or entertained.

Here's the scenario...

A house is listed for sale, priced at $250,000.

Three offers come in, each one higher than the last, as is typical in this market...

Then, the fourth offer comes in.

Offer #4 is an offer of $350,000.  Contingent on the property appraising at or above the contract price.

I'm exaggerating a bit to make my point here -- but not by much.

Basically, a buyer offers WAAAAAY above the asking price -- well beyond what anyone would think would be a reasonable offer for the property -- but makes their offer contingent on an appraisal.

I suppose the thought is that surely a seller would pick an offer of $350K instead of an offer of $255K, $260K or $265K, right!?

Maybe not.

I have had the chance to see several sellers respond to these absurdly, unrealistically high offers and again, sellers usually aren't interested, or fooled or entertained by such offers.

Almost every seller I know would happily take Offer #3 as described above before they'd even start to entertain Offer #4.

Clearly, buyers can attempt to negotiate however they'd wish to do so, but this particular strategy does not seem, to me, to be a winning strategy.

 

Happy Saturday morning to you! 

I hope you had a wonderful week.  I am still unwinding a bit from a great time at the Red Wing Roots music festival last weekend.  I enjoyed seeing many of you there, and if you missed it this year, you should consider attending next year!

Back to the here and now, though -- I'm not sure what your weekend looks like -- but thus far mine has involved sipping coffee while my daughter and I have been drawing on our iPads.  Admittedly, Emily is creating art, and I'm doodling on graphs and charts as included below - but fun times nonetheless.  :-) 

Regardless of whether your weekend will include relaxing at home, traveling out of state to see family, heading to the beach for a week, or working in the yard -- I hope it is a weekend that includes at least some moments of fun and relaxation.  When you get to a few free moments in your weekend, take a look through the remainder of this market update to learn more about what is happening in our quickly moving local real estate market.

First, the full PDF of my market report can be found here, second, the featured home shown above is located at 261 5th Street in Broadway and you find details of it here, and now, let's dive in...

Quickly glancing through the numbers above, you might find your eyes opening wider than normal and your eyebrows rising higher than normal.  There are some rather surprising things going on in our local housing market.  Anyone who is selling their home, or trying to buy their home, knows about these dynamics -- but it's good to put some numbers to it...

[1]  There were 171 home sales in June 2021, which was 28% more than last June!

[2]  Thus far this year (we're halfway through it) there have been 736 home sales, which is 19% more than the first half of last year!

[3]  The median sales price in the first half of this year was $260,000 (!!) which is 11% higher the median sales price during the first half of last year which was only $235,000.

[4]  Over the past 12 months it has taken a median of six days for houses (that sold) to go under contract -- compared to a median of 15 days during the 12 months before that.

Escalation clauses are so YESTERDAY!?!  ;-)

Not really -- many/most buyers are still using them -- but they don't matter much if an appraisal is going to rein a sales price back in...

Consider these three offers on a fictional home listed for $300K...

Let's say there's a house that comes on the market for $300K.  Every Realtor and buyer that looks at it agrees that it is worth $300K because three identical houses sold the prior day for $299K, $300K and $301K.  ;-)

The house immediately has LOTS of interest, LOTS of showings and LOTS of offers.

The house ends up going under contract for $335K.

Wow!

Now, a few things can happen from here...

• If the buyer is paying cash, there usually won't be an appraisal, so it doesn't matter that the buyer is potentially paying $35K above market value.
   
• Maybe the winning buyer agreed to pay $335K regardless of the appraised value.  In such an instance, the house will sell for $335K even if the appraisal comes in at $300K or $305K.
   
• Perhaps the winning buyer agreed to pay $10K over the appraised value, so if the appraisal comes in at $300K or $305K they will be paying $310K or $315K, not $335K.
   
• But quite possibly, the contract is contingent on the property appraising at or above the appraised value, in which case a $300K or $305K appraisal is likely to rein in that high $335K sales price -- bringing it down to $300K or $305K, unless the buyer and seller negotiate towards meeting at some price between the appraised value and contract price.