Tips on Navigating the Current Real Estate Market
As the status quo of our modern-day world continues to be challenged, the real estate market is no exception. The current pace of the housing market, from price increases, to multiple offers, and waiving contingencies, is unprecedented. Never in the history of Arizona real estate has the market been so severely tilted against buyers. It is no doubt a difficult time to be buying a home, and so many people are fighting tooth and nail to secure a property. Here are some tips to help you understand the factors behind some of these things, and some helpful real world tips to help you reach your goals of buying a home.
Expect to compromise
Believe me, I want to help people find the absolute perfect home, and I don’t want people to just “settle”. However it’s actually quite a common realization, especially for first time home buyers and regardless of the current market conditions. Home buyers may have a list of 10 wants/needs in a home. Whether through lots of due diligence, missing out on good homes (but thinking there could be BETTER), or through looking at enough homes to make you blue in the face, home buyers will end up realizing that getting 9 out of 10 things on their wish list is actually pretty darn good. That formal dining space you really wanted and didn’t get, you probably won’t miss at the end of the day, as you’ll enjoy every other aspect of the home.
Todays market makes this even more apparent. Getting a 9 out of 10 wants/needs means you are probably still well over your budget – since securing a good home against the competition means paying more than face value. If you need to buy a home in today’s low inventory conditions, you may just need to accept getting 7 or 8 items on your wish list. Some may get luckier than others, but with inventory at historically low records, you will be competing with at least 1 other person, typically many more, on 95% of properties that hit the market.
Offer the seller your first-born child
OK not literally, but you might feel like you have to. With so much competition on every home, in most cases you’ll need to consider waiving some standard contingencies. The most common is waiving the appraisal contingency.
Let’s say a home is listed at $500k, which is the accurate market value. You offer $530k in an attempt to secure the property. The standard agreement would include an appraisal contingency which means if an appraisal comes back at $500k, the buyer could walk away from the deal without any loss of deposits.
A seller doesn’t want to take on that risk, as they want to make sure it closes, so buyers are waiving appraisal contingency’s to say “hey, I don’t care what it appraises at, I will pay this price”. Since the prices of homes are rising faster than appraisals can keep up with, this has become common practice for buyers lately.
You may also consider shortening inspection periods to further entice a seller to give you a shot. In some parts of the country, we are seeing inspection periods completely waived. I can not in good faith recommend this to a buyer, as buying an older home without an inspection is a highly risky prospect. All homes have a few minor issues to be expected, but not catching a major structural defect could cost you much more than it’s worth to skip an inspection.
Be aggressive, yet patient.
Good homes sell quick with multiple offers, it’s just a fact. If a home is exactly what you are looking for, I can almost guarantee it’s exactly what a lot of other people are looking for as well. We humans like a lot of the same things! So when the “perfect” home becomes available, its go time. That means viewing the home quickly, making an offer quickly, (and making a strong offer), and staying front of mind with the sellers/sellers agents. It’s important to work with an agent who understand this and who can keep up with these markets demands.
After losing on several homes, you may feel tempted to make a desperation bid or give up – Don’t do either. Don’t overpay for a home you don’t even like, you will regret it. I’m not talking about those 7 or an 8 out of 10 homes. I’m talking about a 4 or 5, where it just doesn’t work for you and your family, but you need a house so you just buy it anyways.
There’s a fine line between it all. You have to be aggressive when it counts, but patient for the right opportunities. More homes will always come on the market, although its looking like it may be quite some time until there is ample homes to choose from. Keep your eye on the prize and you will get there!