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No Need To Get Overly Competitive As A Home Buyer... Unless You Have Competition |
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Many sellers of homes newly listed for sale are still receiving multiple offers from eager buyers within the first few days on the market... but that is not universally happening on all new listings. As such... if you're the first one to the party... the first buyer to make an offer, you likely do not need to... [1] included an escalation clause [2] waive a home inspection [3] offer to pay your offered price regardless of the appraised value But... if you submit an offer without an escalation clause, with a home inspection contingency and with an appraisal contingency... and then receive notice that another offer has been received... you might pause to reconsider your offer terms. If you are competing against another buyer, you may very well want to... [1] included an escalation clause and/or [2] waive a home inspection and/or [3] offer to pay your offered price regardless of the appraised value The competition that you do or do not have when making an offer should guide and direct your offer terms. | |
Buying A Great House Is Likely Better Than Eternally Searching For A Perfect House |
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You may have heard of the expression - "Don't let the perfect be the enemy of the good" - and here are a few other similar phrases from philosophers over the ages...
So, how does this all apply to house hunting and home buying? When in the midst of a home search process, when a buyer finds a house that seems like it could work well -- they might get stuck in trying to determine conclusively whether good is good enough... or whether great is perfect enough. It's understandable... Buying a house is an expensive and lasting decision. You'll likely live in the home for many years to come, and the various aspects of the house will shape some of the patterns of your life, relationships and more. So, it's important to get the right house -- a great house -- a perfect house -- right? Yes, 100%. That said, oftentimes a house is great, but is not 100% perfect, and this can leave a buyer wondering whether to go ahead and jump on the pretty-amazing-but-not-perfect house, or to keep looking for something that is an even better fit for their needs or desires. There's no magical answer here -- it's not that you should always decide to buy a great-but-not-perfect house -- and it's not that you should always eternally wait for the perfect house. | |
Local Real Estate App Now Available For Download |
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Funkhouser Real Estate Group has recently launched a real estate app that will make your home search easier than ever. Download it today by clicking here, or read on for some highlights. Enjoy an easy and intuitive map based search when you first launch the app, based on your current location... View full property details for any home on the market with the ability to easily ask a question or schedule a showing... Create a search area by drawing any shape you'd like, and save that search for notifications when a listing hits the market in your areas of interest... Refine your search parameters with a variety of filters allowing you to find just the houses best suited for you... Take this new local real estate app for a spin today by downloading it here. Let me know if you have questions or feedback! | |
It Can Be Hard To Justify Purchasing A Well Maintained Home With Finishes You Do Not Like |
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Sometimes we'll go in a house that has finishes you don't like... but the house hasn't had very many updates in 20 - 30 years, and is priced appropriately given those needed updates. Many buyers can get excited about buying such a home... you can make the updates over time and make selections to make the updated finishes and features match your tastes. But sometimes... we'll go in a house that has finishes you don't like... and that house will have been meticulously updated over time. The expansive kitchen with two year old cabinetry -- of a color or style you just don't like. The flooring throughout the main level that was replaced a year ago -- and is not at all what you would have selected. The challenge in purchasing a well maintained home with finishes that you don't like is that you often feel you have two less than desirable options... 1. Buy the house, don't make further changes, live with finishes you don't love. 2. Buy the house, make further improvements, replacing finishes you don't like with those that you do, taking out reasonably nice finishes and fixtures that just weren't your style. As you can see, neither of these options is particularly compelling... which causes many such would-be buyers to just not buy the house at all. | |
Million Dollar Home Sales Peaked In 2021, 2022 |
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Between 2018 and 2020 there were only three million dollar home sales in Harrisonburg and Rockingham County area as recorded in the HRAR MLS. Then, in 2021, we saw (10) million dollar (+) home sales, and then (10) more such sales in 2022! Home prices were certainly increasing between 2018 and 2021, so one of the reasons we saw more million dollar home sales was certainly because of increases in those home values. But then -- we only saw (4) such sales in 2023. One theory here is that the increase in mortgage interest rates in 2022 and then 2023 resulted in fewer buyers being willing to pay a million bucks (or more) for a home. Thus far in 2024, we have seen two of these million dollar (+) home sales in the first four(ish) months of the year -- though there are four other million (+) dollar listings that are under contract and waiting to make it to closing. If you're eager to purchase a million dollar home in Harrisonburg or Rockingham County, these are your (14) current options. | |
What Would You Buy If EVERY Existing House Were Offered For Sale? |
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What Would You Buy If EVERY Existing House Were Offered For Sale? This can be a helpful question -- though often not specifically productive. Sometimes it can be worthwhile in a home search to take a step back and think about what home (or type of home) you would buy if EVERY existing home were offered for sale. In the current local housing market, with a limited number of homes for sale at any given point, it can be easy to get stuck within the confines of thinking about only the homes that are for sale yesterday, today and tomorrow. But ignore those confines for a moment... what if EVERY existing home in Harrisonburg and Rockingham County were currently offered for sale?!? What would you buy?? This can be a helpful question for broadly exploring what you like, hope for, strive for, and more. It's worth taking the time to work through this exercise. We will then, of course, have to dial it back into the confines of reality... and how often such a home might come on the market for sale and how long you are willing to wait for that ideal vision. So, it's not always a specifically productive question -- but it can be helpful in exploring what you really want in your next house. | |
How Much Can You, And Should You, Spend On Your Next Home? |
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There are LOTS of ways to answer this question, usually within the context of a monthly payment...
The other question (how much should you spend) could be discussed with your spouse, your family, your loan officer, your peers, me, etc. The most important part -- is to have these conversations. We need to know how much money you can spend and how much you are willing to spend on your new home, so that we can be looking for the right houses for you! | |
How Much Will Your Mortgage Payment Change If You Sell Your Home And Buy A New One? |
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If you will be selling your home to buy another, there are a lot of numbers floating around....
Above you will see a spreadsheet I put together to help you think about some of these numbers as you are evaluating if and when you will make a move to a new house. In yellow, are all of the inputs you will need to provide, or that you and I can determine together, such as your current payment, your home's current value, your mortgage payoff, whether you will be putting any additional money into the transaction, etc. In green, I have identified your potential future mortgage payment and the net change in your monthly payment. All of the numbers without a background color will automatically calculate for you. Click here to download this worksheet as an editable Excel file. | |
Many (Or Most?) Home Sellers Prioritize Certainty Over Price |
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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...
It is important, as a buyer, to remember that most sellers are thinking about certainty alongside price. Which of these offers is likely to succeed?
When presented with these three offers I think many or most sellers would choose offer #1 even though it is $1K or $5K lower than the other two offers in hand. Give careful thought to the contingencies you do and do not include in your offer and understand how they affect the seller's view of the certainty that your contract will make it to settlement. | |
What Prices Did Buyers Pay For New Homes Over The Past Year? |
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Over the past year, 322 new home sales have been recorded in the HRAR MLS. The full breakdown is above, but here are a few highlights of what buyers paid for new homes in Harrisonburg and Rockingham County over the past 12 months...
A few more details not shown in the data above...
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It Is Not Your Imagination. There Have Been Fewer Resale Homes Listed For Sale This Year |
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Quite a few home buyers (or would-be home buyers) have asked me lately about whether we are seeing fewer resale homes (not new construction) being listed for sale in Harrisonburg and Rockingham County. Indeed, as shown above, we have seen fewer resale homes listed for sale in the first quarter of this year than in any other recent year. So, it's not just your imagination -- if you're looking to buy a resale home, you have had fewer choices thus far in 2024. But... we're in the thick of the spring market now... with 75 homes listed for sale thus far in April... so the spring and summer market of 2024 will be kinder to would-be buyers than the first three months have. | |
Strong Contract Activity Continues Into April |
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We saw a surprisingly high number of homes go under contract in March this year... 143 of them, compared to only 118 last March. And... this April is also starting off strong compared to last April. In the first 12 days of this month (through this past Friday) we saw 44 houses go under contract in Harrisonburg and Rockingham County compared to only 33 last April. It is turning into a busy spring in the local housing market! | |
A Year From Now, Mortgage Interest Rates Seem Unlikely To Be Much Below Six Percent |
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The current average 30 year fixed mortgage interest rate is 6.82%. If you are waiting to buy a home until mortgage interest rates fall below 6% you might be waiting a while. A compilation of mortgage interest rate projections by Fast Company (here) show the following projected mortgage interest rates for the first and second quarter of 2025... Mortgage Bankers Association: 5.9% in 2025-Q1 5.8% in 2025-Q2 Fannie Mae: 6.3% in 2025-Q1 6.2% in 2025-Q2 Wells Fargo: 6.0% in 2025-Q1 5.9% in 2025-Q2 It seems that mortgage interest rates may very well stay near, at or above 6% for at least the next year. Read more here. | |
How Long Will You Stay In Your Home? |
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It seems homeowners are staying in their homes much longer now than they did two decades ago... with the median homeowner tenure having risen from 6.5 years in 2006 to 11.9 years today. This analysis of homeowner tenure is thanks to a recent analysis by Redfin... A few reasons for this increase in homeowner tenure seem to include... [1] Older Americans staying in their homes longer. [2] More recently, the sticky-ness of low fixed mortgage interest rates. A few results of this increase in homeowner tenure seem to include... [1] Lower inventory levels of resale homes. [2] Continued increases in home values. When I ask folks that I encounter on a day to day basis how long they will stay in their current homes, I often am told that they will stay in their current homes for a very long time, if not forever. This is largely because... [1] They bought their home when home values were lower or significantly lower than they are now, and they are enjoying a relatively low mortgage balance compared to current home values. [2] They bought their home when mortgage interest rates were below 4%... or they refinanced their mortgage when interest rates were below 4%, and they do not want their housing payments to increase if they obtain a new mortgage above 6%. How long will you stay in your home? I plan to stay in mine for quite a while! | |
Another Buyer May Be Able Or Willing To Pay More Than You |
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Many homes in many price ranges are still receiving multiple offers. Thus, a variety of questions may run through your mind if you are making an offer on a popular new listing... [1] How much is this home worth? [2] How much am I willing to pay for this house? [3] Will I win the bidding war? The challenge in answering #3 above is often not in the answer to #1 but in other buyer's answer to #2. It's note quite this black and white, but let's pretend that you and the three other buyers who are making an offer all conclude that the home is worth $350K. You love the house but your budget is capped at $360K. You offer to pay up to $360K. The second buyer won't pay a dime over market value, so they offer $350K. The third buyer has a budget that goes up to $500K, so they are willing to pay up to $370K for the house. Depending on the other terms of the offer, the third buyer is likely to secure the contract on the house. As another example... Let's again pretend that the home in question is worth $350K, but it needs some updates. You love the house, but given the need for some updates you are not comfortable paying more than $350K. The second buyer offers $340K because of the need for updates. The third buyer is super handy and will make all of the updates themselves and has plenty of cash to spare for supplies, etc., so they offer to pay up to $360K. Again, depending on the other terms of the offer, the third buyer is likely to secure the contract on the house. In any given multiple offer scenario, you must remember (as a buyer) that other buyers might be able or willing to pay more than you. | |
You Can Change A Lot About A House, But Not The Location Or Neighborhood |
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That house is PERFECT! It has the right amount of bedrooms, it's the perfect size, I love the flow of the main living spaces, and the exterior siding and landscaping are just what I'm looking for in a home. But... it's not in the neighborhood or location where I'd like to live. Most buyers won't buy the house described above, because they won't be able to change the location or neighborhood of the house. You can finish some basement space to add a bedroom. You can build an addition to create more living space. You can open up some walls or close in some openings to affect the flow of the main living spaces. You can paint or replace exterior siding. You can add, remove or change the landscaping. But... you can't change the location or neighborhood where that house is situated. ** Yes, I understand that technically you could move a house, but it's rather cost prohibitive. ;-) So... if you see a house that you love, but it's in the wrong neighborhood or location... chances are, you won't end up buying it. Buy a house based on the things you cannot change... and be willing to change the things you can. | |
Make The Most Of Each New Listing This Spring! |
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With mortgage interest rates still above 6% and with the vast majority of homeowners having mortgage interest rates below 4%, there will likely be far fewer new listings this spring. Why, after all, would a homeowner want to sell, pay off their mortgage with a 4% interest rate and buy, obtaining a new mortgage above 6%? Certainly, there are still plenty of reasons why homeowners will sell their homes even give the mortgage interest rate dynamic described above. Some may be moving out of the area, or moving to a different neighborhood or school district, or moving to have more space, or to have less maintenance. But the difference in most current mortgage holder's rates and current market rates is likely to continue to suppress the number of new listings we will see hitting the market. As such, if you're looking to buy a home this spring -- because you are moving into the area, or because you are currently renting, or for any other reason -- you should make the most of each new listing. Talk to your mortgage lender to get pre-approved... now. Go see each new listing of potential interest.. .quickly. Be ready to make a decision about an offer... quickly. | |
The Differential Value In Your Escalation Clause Should Likely Vary Based On The Other Terms Of Your Offer |
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We're still in a housing market where many new listings will have multiple offers within a few days -- not all new listings, and maybe not most -- but many. As such, if you are hoping to buy a home this spring or summer you may find yourself competing against another buyer (or buyers) when you make an offer. If you are making an offer, and competing against one or more other offers, you may find yourself including an escalation clause in your contract. How does an escalation clause work, you might ask? An escalation clause allows you to make an offer at one price but include offer terms that will automatically increase that offer if another offer is at a higher price point. For example... offering $325K... but automatically increasing your offer up to $340K if there is another higher offer. One missing element of the description above is the differential value in your escalation clause. Here are two different versions of the escalation clause above, with differential values... [1] Offer of $325K, automatically increasing to be $1K above other offers, up to a maximum of $340K. [2] Offer of $325K, automatically increasing to be $5K above other offers, up to a maximum of $340K. Let's say, for illustrative purposes, that you are (unbeknownst to you) competing with an offer of $330K. The first escalation clause above [1] would cause your offer to be $331K. The second escalation clause above [2] would cause your offer to be $335K. Why would you include a differential of $1K vs. $5K vs. something even higher? Oftentimes, it depends on the other terms of your offer. If you are making a very clean offer with an 80% financing contingency, no home inspection, no home sale contingency and a speedy proposed settlement... you might just include a $1K differential in your escalation clause. The thought or hope in this instance is that your offer terms (other than price) will be equal to or better than the competing offer, and that your offer being $1K higher is enough of a difference to hopefully cause the seller to accept your offer. If you are making an offer with a smaller downpayment (95% financing), and with an inspection contingency... and if you suspect you are competing against buyers with larger downpayments or without inspection contingencies... you might include a larger differential in your escalation clause. The thought here is that if your offer with an inspection contingency is only $1K higher than a competing offer without an an inspection contingency, the seller will likely accept the other offer... but if you are offering (via the differential in your escalation clause) a price that is $3K (or $5K) higher than the competition, maybe that differential will be enough to cause the seller to still consider your offer despite the inspection contingency. And so on and so on. If you are proposing a delayed settlement date, increase the differential. If you have a home sale contingency as well, increase the differential. You can't know the details of the terms of the offer with which you are competing... but you can be strategic about how you craft the terms of your escalation clause based on the other terms of your offer. | |
Even If You LOVE A House, You Will Probably Only Be Willing To Pay So Much Or Remove So Many Contingencies |
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Sometimes we end up searching for a home you LOVE for quite a while! Sometimes we never find a house that you completely LOVE but we find one that you like, a LOT. But, yes, sometimes we find a house that you absolutely LOVE!!! And yet... 1. You are probably only willing to pay so much for that house that you love. If a house is priced at $400K and that price is in line with recently sold properties, and it is an absolutely perfect fit for what you want in a home, and like nothing we have seen in over six months of searching... then you might be willing to pay $425K for the house. But you probably wouldn't pay $450K. There is a limit, for most buyers, of how much they'll pay even if it is an absolutely perfect fit. 2. You are probably only willing to remove so many contingencies from your offer. Will you remove an inspection contingency from your offer on an absolutely perfect house? Maybe, maybe not. Will you remove an appraisal contingency for said house? Maybe, maybe not. Will you liquidate assets to pay cash instead of having a financing contingency? Maybe, maybe not. Will you take on the risk of having two mortgages and remove a home sale contingency? Maybe, maybe not. For any given house, even one that you LOVE, we'll have to discuss how far you are willing to go to buy that house -- relative to price, and contingencies. | |
Consider Reverse Buyer Remorse When Deciding Whether To Make An Offer On A New Listing |
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So, you followed my advice and we went to see that new listing on the first or second day it was listed for sale. Great! Buyers in most price ranges in Harrisonburg and Rockingham County still often need to see a home rather quickly when it hits the market in order to have a chance to make an offer. But now, you don't know what to do. You like the house a lot... but maybe you don't love it. You recognize that it checks off a lot of boxes of what you are looking for in a home... but you weren't immediately convinced that this was "the one" for you. So, what do you do? Do you make an offer? Do you decide not to make an offer? Do you keep thinking about it for a few days even though that might mean you miss out on the chance to buy it? It can often be helpful to think about this decision by considering the concept of reverse buyer's remorse. Buyer's remorse is a feeling of regret after having decided to buy something. It doesn't happen that often with real estate, in my experience, but more often with other purchases of things you don't necessarily need. Reverse buyer's remorse (as I'm using the phrase) is a feeling of regret for NOT having decided to buy something. If you don't make an offer on this house, and someone else buys it, will you be sad to have missed out on it? If you would be sad to have missed out on it, maybe you should make an offer. If you would not be sad to have missed out on it, maybe you shouldn't make an offer. | |
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Scott Rogers
Funkhouser Real
Estate Group
540-578-0102
scott@funkhousergroup.com
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