Buying
| Newer Posts | Older Posts |
 |
 |
Sometimes, Appraisals Are Reining In High Contract Prices, And That Can Keep Sales Prices From Getting Out Of Hand |
|
 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...
So -- even if buyers are willing to (per their offers) pay higher and higher and higher prices for houses -- regardless of what other buyers recently paid for similar houses -- the appraisal process is still, often but not always, keeping things in check and preventing prices from skyrocketing too quickly. | |
 |
 |
|
|
All The Right Spaces In All The Wrong Places!? |
|
 Layout and room size is so important. It's delightful to have 2500 square feet -- but that amount of space could present itself very differently in a variety of homes...
As you can likely gather from these two exaggerated descriptions above...
Each house is probably "the perfect house" for some buyers, somewhere -- but I'm guessing that both houses aren't perfect for you. Most buyers would find themselves gravitating towards one of the houses at the exclusion of the other. As such, it is vital that we walk through houses to see how the floor plan and layout of the house will or will not support your needs and typical life activities. | |
|
|
|
|
Drive By New Listings To See What Might Have Been Cropped Out Of The Photos |
|
 It's almost always helpful to do a drive by of a new listing to see what might not have quite made it into the photo you're seeing online. Oftentimes, you won't find any surprises. But plenty of times, you will...
You get the picture. ;-) When marketing a house, a seller or seller's agent or photographer are rarely going to accentuate those "just outside the frame" features that might make you a bit less excited about the house. When you drive by, you'll be able to pick up on many more of those details that may affect your interest level. This is not to say that you should drive by a house before we schedule a time to go see the house -- it is merely to point out that driving by will often show a fuller context of a house than just what is presented in the photos! | |
|
|
|
|
Pretend The Seller Is With You When Touring A House As A Buyer |
|
 As a buyer, when you are walking through a home, keep in mind that the seller might be listening! These days, there are plenty of ways that a seller could be monitoring their home, with a security camera, or other recording device that could allow them to hear every word you are saying while you are in their house. And, these cameras (or other listening devices) are less and less obvious and less and less expensive! So..... 1. Don't insult their house. It won't help during negotiations.One way around this is to pretend (as a buyer) that the seller is walking through the house with you. By the way, sellers, it may not be legal for you to record conversations in your home while you are gone. You should likely either NOT record conversations, or disclose that it is taking place. P.S. I am not an attorney. Consult one if you want an actual legal opinion. Ask me if you need a recommendation. | |
|
|
|
|
It Is Not Possible For You To Ask Too Many Questions When Selling Or Buying A Home |
|
 Most people do not buy or sell a home every year - or even every few years. Oftentimes, when buying or selling a home, you haven't done so in 5+ or 10+ or even 20+ years. Thus, it is natural to have some questions about how things work when buying or selling your home. Your likely lack of recent personal experience with buying or selling is also compounded by the fact that laws and contract documents continue to evolve over time AND market conditions at any given time can affect how transactions typically flow. So, when you are buying or selling a home OR when you are thinking about buying or selling a home -- feel free to ask questions -- a LOT of them! But they're silly questions... There aren't any silly questions when it comes to buying or selling a home. You are getting ready to buy or sell what may be your most valuable finance asset -- it's a big deal -- so if you have a question, as the question. I won't laugh or snicker or smirk. Promise. But maybe you don't have time for all these questions... Sure I do. Feel free to email me if that's how you prefer to get a bunch of questions out there and I can provide you with some detailed feedback by email. Or maybe you prefer to process things aloud, in which case we can sit down at my office or over coffee and talk things through. I want you to be well informed and to feel confident as you approach and make your way through the home buying or selling process. I can't always anticipate all of the questions you might have -- so please do ask the questions as they pop into your mind -- all of them! ;-) | |
|
|
|
|
Is The Housing Market Still Crazy? Is The Sky Still Blue On A Sunny Day? |
|
 So, yes... the housing market is still crazy... and the sky is still blue on a sunny day. Speaking of sun... and heat... looks to be a scorcher this week!?! A client asked me this weekend if the market was still pretty crazy / busy / active. Indeed, it is. Will it slow down sometime? I'm not thinking it will anytime in the foreseeable future. Maybe in November? I think there is a good chance that homes will keep selling as quickly as they are right now (median of 4 days on the market thus far in June) for the rest of the summer and into the fall. Which is GREAT if you are going to be selling your home and is AWFUL if you are trying to buy a home. But yes, you can buy a home -- it will just likely take a bit longer to find a home you like (given very low inventory levels at any given time) and to secure a contract amidst a likely multiple offer scenario which we are seeing on most property prepared, priced and marketed new listings. So, yes, the market is still crazy - and I'm not predicting that to change in the near term. What about you? Do you think things will slow down at all this summer or fall? | |
|
|
|
|
Selling A Home Is A Sprint, Buying A Home Is A Marathon |
|
 "How's the real estate market these days? Moving pretty fast, right?" Well, yes and no. It depends on whether you are a seller or a buyer. :-) Indeed, if you are selling your home (or will be soon) the market is moving FAST and the process will seem like a sprint...
So, yes, the market is moving pretty fast if you are selling your home. But if selling a home is a sprint, buying a home is definitely more like a marathon! Many buyers these days are finding themselves making offers on multiple houses before finally securing a contract to buy a home. One of the buyers I am currently representing recently signed a contract on a home after having made unsuccessful offers on five other properties! So, yes, the market is moving quickly -- but while a seller gets the luxury of running a quick sprint in the house market -- most buyers need to prepare for running a marathon. | |
|
|
|
|
Are Lumber Prices Finally Starting To Normalize? |
|
 If you haven't heard -- lumber prices skyrocketed during COVID. The graph above shows only the past 12 months. If we look a bit further back we can get a bit more context...
So, "normal" over the four years prior to COVID seemed to be a range of around $300 to $475 --- although prices did rise to $639 back in mid 2018. But then, as lumber mills shut down due to COVID and production slowed, prices skyrocketed, getting as high as $1,635 in May 2021. But over the past month, that price has fallen quite a bit...
So, a nearly 50% decline in prices over the past 45 days? That is solid progress towards getting lumber prices back to their long term normal-ish range. Hopefully this will mean we'll start to see more new construction, creating more housing inventory, and easing the inventory strained housing market... | |
|
|
|
|
Home Prices Are Rising Quickly But Buyers Seem To Be Well Qualified To Buy What They Are Buying |
|
 I started working in real estate way 18 years ago, way back in 2003. Between 2003 and 2006 home sales and prices shot up quickly -- and then sales slowed dramatically and prices declined slowly. Does it feel somewhat similar now? We're seeing significant increases in the number of homes that are selling -- and significant increases in our area's median sales price. But -- at least one thing is definitely different right now compared to that 2003-2006 timeframe... Today's home buyers seem to be very well qualified to buy. Back in the early 2000's when sales and prices were careening upward, some/many buyers were only marginally financially qualified to buy the homes they were buying...
These days, things are quite different...
So, yes, the market is heating up like it did in 2003-2006, but this go round, home buyers seem to be very well qualified to buy what they are buying. That would seem to be good news for the future stability of our local housing market. | |
|
|
|
|
What Would Be A Reasonable Offer To Make On This House? |
|
 Some clients asked me this question a few weeks ago... What Would Be A Reasonable Offer To Make On This House? ...and we had a good laugh after we started thinking and talking about it. As I told them: Reasonable offers don't buy houses in this market!? Indeed, it's that kind of market these days. It used to be that we'd look at what other buyers recently paid and then extrapolate from there as to what would be a reasonable offer to make on a house. If similar houses recently sold for $265K and $270K and $275K -- it would be reasonable to pay between $270K and $280K for that newly listed house down the street, right? Ha ha. Maybe in some long forgotten time when the market felt more normal or balanced or sane. These days... If other buyers recently paid $265K and $270K and $275K for similar houses, a seller wouldn't be surprised to receive offers with escalation clauses going up to $290K or $300K or even $310K. As such, we need to think about your offer price not only within the context of what other buyers recently paid for similar houses. Is it reasonable to pay 5% to 10% more than other recent buyers have paid for similar houses? Maybe... maybe not... But it's likely the only way you'll be able to actually secure a contract on a house! | |
|
|
|
|
Several Ways To Think About Appraisal Contingencies |
|
 It used to be pretty common for real estate contracts to be contingent on the property appraising at or above the contract price. If a buyer was to be paying $350K for a house -- they wanted to make sure the appraised value was $350K or higher. These days many buyers understand that they might need to be willing (and able) to pay above the appraised value in order to actually buy a home. After all, if a house is listed for $350K and there are six offers on the house, all with escalation clauses and the winning offer is $370K -- that buyer may need to be willing to still pay $370K even if the appraised value ends up being $350K or $360K. Here, then, are a few ways that buyers are thinking about and dealing with appraisal contingencies... Contingent On Appraisal Some buyers are still making offers that are contingent on the appraised value being equal to or greater than the contract price. These offers are often going to be the ones that are least likely to be accepted in a multiple offer scenario if all other terms were the same. It is fine to include this contingency in an offer -- but it greatly reduces the likelihood that the seller will choose to move forward with your offer. An Unspoken But Implied Contingency If you are financing 90% or 95% or 97% or 100% of the purchase price -- even if you don't have an appraisal contingency explicitly included in your contract -- your offer may effectively be contingent on the property appraising at/above the contract price due to the financing contingency. When a buyer is financing 95% of a $250K purchase price -- and the appraisal comes in at $240K, their lender will likely require the buyer to bring extra cash to closing. If the buyer has extra cash -- great. If not, the buyer will not be able to move forward with the purchase as a result of the low appraisal -- even without an appraisal contingency -- because of the financing contingency. A Limited Contingency Perhaps you're offering $310K for a house and you are willing and able to move forward with the purchase so long as the property appraises at or above $300K. As such, you're willing to pay $10K above the asking price. We can make your offer contingent on the property appraising for at least $300K -- which will give the seller more peace of mind because you are willing to pay $10K over the appraised value. Not At All Contingent Maybe you love a house soooo much that you do not even care about the appraised value -- and your financing or cash situation is such that it won't change things if the appraisal comes in slightly or significantly low. In such an instance, we don't need to make the contract contingent on the property appraising at any particular price -- and we might even go so far as to say in the contract that you will proceed with the purchase regardless of the appraised value. In Summary... It's a fast moving market these days and with so many buyers making offers on properties, many buyers are often willing to pay above appraised value for a property that is a great fit for them. It is important to think about and talk about the appraisal process and strategically incorporate (or don't incorporate) whatever contract terms make the most sense given your level of interest in the property, your financing situation, your cash situation, etc. | |
|
|
|
|
I Do Not Think The Housing Market Would Collapse If Mortgage Interest Rates Rose A Bit |
|
 Mortgage interest rates have been very low for quite a while now. The average 30 year fixed rate fell below 4% just over two years ago -- on May 30, 2019 and has never looked back. Furthermore, this average rate has been below 3% for 36 of the past 41 weeks. So, yes, mortgage interest rates are low. Super low. Eventually, they will start to rise -- maybe above 3%, maybe to stay above 3%, maybe above 3.5%, maybe even up to 4%! When mortgage interest rates start to rise, will the housing market collapse? Will prices fall? I am thinking not -- so long as interest rates move slowly and steadily and not quickly and erratically. Right now many houses are seeing 5+ (or 10+) offers within just a few days of being on the market. Not all houses, in all price ranges, in all locations -- but many houses! What will happen if interest rates start to rise? Perhaps if they rise far enough, some of those buyers will no longer be qualified to buy -- or will no longer comfortable buying based on their mortgage payment. But what will that actually mean? Maybe instead of 5 - 10 offers on a house there will be 4 - 8? Or 3 - 7? Demand exceeds supply by sooooo much right now that if mortgage interest rates rise a bit, unwinding some of that demand -- it will almost certainly still be a very strong seller's market -- just not a very, very, very strong seller's market. So, if you start to see mortgage interest rates rising, yes it is possible that it will eventually have an overall impact on our local housing market -- but I don't think it is likely to change the overall market fundamentals. | |
|
|
|
|
Creative Ways To Prepare To Buy A Home In A Market That Heavily Favors Sellers |
|
 My constant refrain to buyers in this market has been... Go see a house on the first day or two it hits the market, be ready to make an offer that same day, be prepared to potentially make an offer above the asking price and consider waiving contract contingencies you would normally include. Sort of overwhelming, right? Especially for first time buyers, or buyers moving into the area, or buyers who also need to sell in order to buy. If you're feeling a bit stressed about what the home buying experience is going to look like given our current market dynamics, here are a variety of ways to help you prepare for what lies ahead... [1] Talk To A Lender This one is rather obvious -- but please talk to a mortgage lender sooner rather than later. When the house of your dreams comes on the market on a Tuesday morning and we see it Tuesday lunchtime and you decide you want to make an offer, you don't want to be scrambling all Tuesday afternoon to try to get prequalified for a loan. Even if we haven't found a house for you to buy -- go ahead and talk to a lender to get prequalified, to understand the payment that will accompany a variety of prices of homes, etc. Having this information in hand will allow you to make a more informed decision about what you are willing to pay for a particular house once it comes on the market. [2] Go See Houses In a low inventory market (yes, we're in one) you might look around and find very few houses for sale that are of interest to you. Furthermore, you might not see many new listings of interest come on the market in the first few days or weeks that you're paying attention to new listings. Let's just start going to see houses. If a house comes on the market that is relatively close to what you're looking for in a new home -- even if it's not an exact match -- let's go see it. Starting to see houses, in person, will help you clarify what you want to buy and will help you better understand the market as to what prices are reasonable for what types of houses. [3] Explore Neighborhoods Of Interest Start driving around neighborhoods where you think you might want to buy a house to better familiarize yourself with those neighborhoods. Don't just explore neighborhoods where new listings are located - explore other neighborhoods too, since new listings very well may pop up there in the near future. You can explore many of our area's neighborhoods here. [4] Proactively Review Contract Documents When we have a matter of a few hours in which to make an offer, and you're really excited about the house, and you don't want to miss out on buying it, and I email you a 15 - 20 page document to review, are you going to feel like you have the time to thoughtfully review the offer documents and ask all of the questions you might have about what you are committing to in the offer? Probably not. So, let's review a fake offer on a fake house ahead of time. We can spend 30 - 60 minutes together (in person, via Zoom, etc.) reviewing the main contract documents that we will likely be using when preparing an offer on a house you want to buy. This will give you a chance to better understand the contract documents and ask questions about how the buying process and contract contingency works without feeling the stress of needing to just sign the documents to make the offer to not miss out on the house. [5] Study Sales Data These days, particularly, just watching the list prices of new listings is not enough to truly understand our local housing market. Many houses are selling above asking price with multiple offers. As such, it can be helpful to take a look at the actual sales prices of homes of interest -- or homes in neighborhoods of interest. You can follow sales prices of all homes selling through our local MLS here. It can certainly be a hurried and stressful time to buy a house -- but there are ways to prepare and plan ahead to take some of the stress out of the process! If you have questions about the buying process or if you're looking for a reputable local lender, email me (scott@hhtdy.com) or call/text me at 540-578-0102. | |
|
|
|
|
The Ever Speedier Pace Of Our Local Real Estate Market |
|
 Maybe you've heard that homes are selling quickly these days? ;-) Indeed, they are! As shown above -- for the homes that have sold thus far in 2021, that went under contract in 2021, the "median days on market" was only four days! That means that half of these homes were under contract in four or fewer days! To put that in a greater context, as per the graph above -- that median was 10 days last year, nearly 20 days three years ago, and nearly 30 days four years ago. So, yes, homes are selling QUITE speedily this year! Buyers, as a result...
It's a STRONG seller's market out there right now, and this shows itself most clearly in the speed at which homes are going under contract. Enjoy, sellers! Good luck, buyers! | |
|
|
|
|
Consider Strategically Crafting An Escalation Clause Based On Your Other Contingencies |
|
 So, let's consider this scenario... Offer #1 = $255K Offer #2 = $250K with an escalation clause to increase $1K above all other offers up to $270K Based on this information, buyer #2 wins, right? Their offer is effectively $256K and the first offer is $255K, so the seller would definitely pick offer #2, right? Well -- maybe. What if we had these additional details... Offer #1 = $255K, contingent on the buyer financing 80% of the purchase price, and no home inspection Offer #2 = $250K with an escalation clause to increase $1K above all other offers up to $270K, contingent on the buyer financing 97% of the purchase price and contingent on a home inspection and contingent on the property appraising at/above the contract price I suspect you may see where I'm going with this. In this situation, why would a seller pick offer #2, just for a sales price that is $1K higher, to then voluntarily be subjecting themselves to possible further negotiations related to the home inspection, the appraised value, and with a buyer who would appear to be less financially qualified (3% down payment instead of 20% down payment) than the first buyer? Most sellers would likely pick Offer #1 in this more nuanced scenario. So -- extrapolating from this specific "what if" -- if your offer will include contingencies or terms that are bound to be less favorable to the seller, you may want to consider being willing to pay a higher price compared to other offers. Here's how that might look... Offer #1 = $255K, contingent on the buyer financing 80% of the purchase price, and no home inspection Offer #2 = $250K with an escalation clause to increase $5K above all other offers up to $270K, contingent on the buyer financing 97% of the purchase price and contingent on a home inspection and contingent on the property appraising at/above the contract price Now, the seller has an offer of $255K and an offer of $260K. The higher offer still has more contingencies to work through -- but perhaps they are more willing to do so given that the sales price would be $5K higher in this scenario instead of just $1K higher. So, as you consider that "differential" that you put in your escalation clause -- consider the other terms and contingencies you are including and how they might compare to other competing offers -- and consider adjust that differential accordingly. P.S. No, I'm not an attorney. I'm not offering legal advise. I'm just a Realtor pondering negotiating strategies aloud. Consult with your Realtor about how to draft the most competitive offer on a property based on your situation and that individual property. :-) | |
|
|
|
|
Why Was MY Offer On The House Not The Winning Offer? Again!? |
|
 If you're trying to buy a house in 2021, it is not uncommon to make an offer on a house -- only to have it NOT be accepted. After all, many new listings are seeing 3, 5, 10, 15 offers within a few days of being listed for sale -- and clearly, the seller can only accept one of those offers. As a result, many would-be buyers are finding themselves wondering WHY didn't the seller accept MY offer!?!?! Was it all about price? Did I not offer them enough money? Well, yes, there is a good chance that your offer was not accepted because someone else was willing to pay a higher price for the house -- but there are quite a few other reasons why your offer might not have been accepted. Here are some of them...
Those are but a few of the reasons why your very strong offer may not have been accepted by a property seller. It can, after all, be pretty surprising when you make a very strong offer and then are told that you didn't win. As a side note, we usually won't know why exactly your offer was not selected -- but we can always ask to see what the seller's agent can share. That feedback, if provided, can help guide your decisions when you make an offer on the next exciting new listing to hit the market. | |
|
|
|
|
What Could I Discover In A Home Inspection That Would Make Me NOT Want To Buy This House? |
|
 The conversations about home inspections (and whether to do them as a part of a home purchase process) are playing out a bit differently these days. I used to always recommend that a buyer conduct a home inspection as a part of their home purchase process. I still do recommend that - but I now much more clearly point out the potential ramifications of including a home sale contingency in an offer in the current market. When there are five or more offers on a home (as there often are these days) there seems to be a relatively good chance that at least one of the buyers will not include a home inspection contingency in an attempt to be the buyer whose offer is selected by the seller. Most sellers, after all, would much rather not have to deal with a home inspection -- even if they wonderfully maintain their home and do not know of any property condition issues. Thus, many buyers are now asking themselves... What Could I Discover In A Home Inspection That Would Make Me NOT Want To Buy This House? If you asked most buyers that question three years ago they would probably say "plenty of things!" - and most buyers would then include a home inspection contingency. These days, more and more buyers are saying "well, probably not much, right?" - and those buyers are deciding not to include a home inspection contingency. So - if you're buying a home (or hoping to buy a home) in the crazy seller's market of 2021 - should you include a home inspection contingency? It probably depends on...
We can talk further about this decision as we consider each particular property during your home search. | |
|
|
|
|
Welcome To The Ebb and Flow of the Summer Real Estate Market |
|
 Week 1 - Lots of new listings Week 2 - A few new listings Week 3 - No new listings Week 4 - Lots of new listings Scramble and repeat. Welcome to summertime! This spring was rather busy in our local real estate market with lots of new listings -- most of which promptly went under contract, many with multiple offers, many over the asking price. But now, summertime. During the summer months we typically see a slow down for a few weeks as school ends and then a very sporadic flow of new listings through June, July and August. This is mainly a result of people planning to leave for vacation, being on vacation, and recovering from vacation. So - there will certainly be plenty of new listings to consider this summer, but the timing of when those listings come on the market may very well seem irregular and random. If you haven't developed patience thus far as a buyer through a tumultuous and competitive spring market, the ebb and flow of new listings this summer should help you get to a zen-like level of patience. ;-) | |
|
|
|
|
The Housing Inventory Shortage Is Not Likely To Quickly Work Itself Out |
|
 Did you hear that...
It's not happening on every house in every price range in every location -- but it (lots of showings, multiple offers) is happening very frequently these days. Clearly, there are waaaaaay more buyers in the market than there are sellers. And, sadly, it doesn't seem that this housing inventory shortage is not likely to work itself out anytime soon. After all...
So, alas, for the foreseeable future...
I wish I saw an easy or fast or near-term way out of this situation, but I'm not currently seeing it on the horizon. In theory, the answer is new construction of "for sale" homes at scale, but we're not there yet... | |
|
|
|
|
The Number Of Offers On A Single House Is Sometimes Staggering! |
|
 I know that you've heard that it is a strong seller's market and there is lots of competition amongst buyers for many new listings -- but did you know HOW extreme it has become in our local market? Two houses are referenced below that have come on the market in the past month or two. Neither of these were my listings, but I did have a buyer make an offer on each of them -- and the buyers missed out -- their offer was not the chosen one... Anonymous Property #1 Priced between $200K and $250K 16 offers within 48 hours Anonymous Property #2 Priced between $275K and $325K 17 offers within 48 hours Indeed -- 16 offers on one property, 17 offers on the other. I believe each had 30+ showings in the first two days. Wow! A few thoughts...
Again, it is staggering how much unmet buyer demand exists in the market these days. It's a great time to be a home seller. It's a rotten time to be a home buyer. :-/ | |
|
|
| Newer Posts | Older Posts |
Scott Rogers
Funkhouser Real
Estate Group
540-578-0102
scott@funkhousergroup.com
Licensed in the
Commonwealth of Virginia
Home Search
Housing Market Report
Harrisonburg Townhouses
Walk Through This Home
Investment Properties
Harrisonburg Foreclosures
Property Transfers
New Listings
