It is no secret that we are currently in the hottest seller’s market ever. With little to no inventory and buyers hungry for homes, the competition is fierce. I mean, with interest rates still at an all-time low, buyers would be foolish not to want to jump on the opportunity to become a homeowner, but do they fully understand what they are signing up for? With today’s high demand and competition, it feels more like the Hunger Games out there.
Bidding Wars on Bidding Wars
What is on the market is going fast, often over asking price, and buyers are giving up their protections. We are seeing bidding wars across the board, absurd amounts over asking, waived contingencies, and some buyers are even offering to pay sellers’ closing cost, amongst other various things. There recently was an offer where the buyers offered the sellers a year’s Netflix subscription along with a $250 gift card to The Capital Grille. Is that what it takes?!
To win a bidding war these days, buyers need to put their best foot forward. Go all-in the first time around or be brutally defeated. While buyers have the option to utilize low down-payments, it’s not helpful when there are three other offers on the table with upward of 20% down, or even cash.
It is the buyer’s right to obtain a home inspection on a property they are purchasing. This is the largest financial purchase of their life; shouldn’t they want to know what they are buying, or at least have an idea of what needs immediate attention so they can plan accordingly? In today’s market, the first thing waived is the buyer’s home inspection.
If waiving your home inspection wasn’t scary enough, buyers are waiving their mortgage contingency and appraisals just to get their offer accepted. With homes going for $50,000, even $100,000, over asking, that’s a huge financial risk and lots of cash to bring to the table. First-time homebuyers utilizing lower down payments just don’t have this leverage.
Forget about if you have a home sale contingency. No seller wants to accept an offer where the buyer must also successfully sell their home to make this purchase. Sellers see this as a risk, since there are now so many moving parts to get to the closing table. If one thing gets delayed, everyone is affected.
A large issue agents are seeing that makes things even more difficult is when a seller’s agent lists the property with showings only at open house, which will be held Saturday and Sunday for two-hour blocks, with an offer deadline of Monday. Let’s not forget about the agents who are making the open houses “by appointment only.” Doesn’t this defeat the purpose of an open house? Third-party sites such as Zillow and Redfin don’t advertise “by appointment,” so, really… what’s the point?
Then there are buyer’s agents with multiple buyers in this market? It’s impossible to be two or more places at once, although it would be nice. Are they supposed to pick and choose which buyers they take out that weekend, when inventory is already so minimal?
Or let’s talk about the open houses that are a free-for-all, and buyers are waiting in line for 45 minutes just to get into the home, only to be rushed out in 10 minutes. Buyers are being restricted not only in how many homes they can see in a weekend, but also in how long they can view the home. Let’s not forget this is the biggest purchase of their life, but they see it for all of 10 minutes and need to decide by end of day to meet the offer deadline.
Yes, it is a good time to buy a home, but at the same time, buyers need to be prepared. This means making sure you have all your ducks in a row, are ready to be competitive and have aligned yourself with a good team to strategize.