Buying
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I Just Sold My House. Should I Buy A House This Year Or Wait Until Next Year? |
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 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... Buying Today for $300K and Financing 80% of the Purchase Price Mortgage Payment = $1,259 per month (2.78% mortgage) $427 per month in principal reduction $832 per month in interest, taxes and insurance A year later you will have paid $15,108 for housing -- but $5,124 of that will have gone towards principal reduction. Thus, you will have "paid" a net of $9,984 during the year. Renting For A Year and Then Buying The Same House We will (generously) assume that interest rates will be the same a year from now. They'll probably actually be higher. We're going to assume you'll pay around $1,200 per month in rent for a year, which won't get you as nice of digs as your $300K purchase, but perhaps you keep the rental budget low to minimize your rental costs. A year later you will have paid $14,400 in rent as compared to $9,984 if you went ahead and bought now. Thus, your housing costs would be $4,416 higher for the coming year if you rented now instead of buying now. Now, let's fold that into how home values might change over the next year... Same Increase In Home Values As The Past Year (+10.9%) The $300K home you did not purchase will now cost you $332,700. As such, you will have paid an extra $4,416 in rent and you'll now pay an extra $32,700 in a purchase price. Ouch. That makes it $37,116 more expensive to wait a year,. This scenario is not necessarily very likely to occur as the 10.9% increase in our local median sales price was well above any long-term norm. Same Increase In Home Values As The Average Of The Past Five Years (+5.8%) The $300K home you did not purchase will now cost you $317,400. As such, you will have paid an extra $4,416 in rent and you'll now pay an extra $17,400 in a purchase price. Still relatively painful. That makes it $21,816 more expensive to wait a year. Same Increase In Home Values As The Average Of The Past Ten Years (+3.2%) The $300K home you did not purchase will now cost you $309,600. As such, you will have paid an extra $4,416 in rent and you'll now pay an extra $9,600 in a purchase price. That makes it $14,016 more expensive to wait a year. No Change In Home Values You pay the same ($300K) price for the same home a year from now and you just lose the $4,416 in extra housing costs that you paid by renting for a year. Home Values Drop 1.5% If home values drop 1.5% over the next year -- then you'd basically break even. You would pay $4,500 less in a purchase price after having paid $4,416 more in rent during the intervening year. Home Values Drop 3% or 5% of 10% If you get above a 1.5% decline in home values over the next year -- then, yes -- it would have made more sense to have waited a year after selling to buy your next house. So, What Do You Conclude? In the end, you'll need to decide which of these scenarios seems the most likely to occur in the next year...
But... don't forget... I'm leaving out a few factors that would probably cause most people to buy now (after selling) rather than waiting a year...
Yes, this analysis had a lot of detail -- but there is plenty of nuance in any scenario where you are thinking about buying or renting. Feel free to touch base with me if you want to think through or talk through your scenario and options. | |
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Why In The World Are You Buying A House Without A Home Inspection?? |
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 Yes, sometimes buyers these days are making offers on houses without a home inspection contingency. As Paige asked yesterday... Is everyone else in the world significantly more handy, a better gambler, or just have that much cash laying around? Good question, Paige! :-) Here are some of the reasons why buyers are making offers without home inspection contingencies...
A few more thoughts and observations...
Home buyers have some difficult decisions to make these days as they formulate a plan for pursuing a house in a housing market with very low supply levels. Deciding whether to include a home inspection contingency is just one of those difficult decisions. | |
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I Will Offer You ONE MILLION DOLLARS For Your House... Oh, Contingent On An Appraisal... |
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 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. | |
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Special Saturday Edition: Home Sales, Prices Flying High In Harrisonburg Area |
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 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. So, yeah, lots of homes are selling, at much higher prices than a year ago, and much more quickly! Breaking it down between detached homes and attached (duplexes, townhouses, condos) homes reveals a few other details...  Above you might notice that... [1&3] There have been a 19% increase in the number of detached homes that have sold in Harrisonburg and Rockingham County over the past year -- but a much higher 37% increase in the number of attached homes that have sold! [2&4] The median sales price of detached homes ($285,000) has risen a bit more (14%) over the past year than the median sales price of attached homes ($200,000) which has only (haha) risen 11% over the past year. Those (above) are the long term trends. When we dial in a bit and look at things on a monthly we find that this strong increase in the number of home sales thus far in 2021 has been a month after month after month occurrence...  I have highlighted each of the first six months of 2021 in yellow above, and the corresponding month last year in gray. Now, it certainly bears noting that home sales during some of the months in the first half of last year were likely a bit lower than they would have been otherwise because of Covid, but regardless -- each month of home sales in 2021 has been head and shoulders above the corresponding month of 2020. And now, let's see how this first half of the year stacks up against the first half of the past few years... look for the dark blue bars...  As you can see, with over 700 home sales (736) in the first half of 2021 this year is well ahead of the pace of home sales in the first half of each of the past three years. Looking ahead, it currently seems quite reasonable to think that we would see 1500+ home sales in 2021, with one significant exception. Home sales were tilted towards the second half of the year last year due to Covid, so while we are seeing stronger sales in the first half of 2021 (compared to 2020) things might level out a bit when we get to comparing the second half of 2021 to an abnormally strong second half of 2020. The next visualization is still shocking to me each time I update it with another month of data...  A year ago, 1300-ish buyers were buying homes a year -- now that has risen to 1600+ buyers per year!?! Indeed, it feels like EVERYBODY wants to buy a home... because, keep in mind, this 1600+ per year figure does not include all of the would-be buyers who made offers on houses in the past year but were not successful in securing a contract to buy a house!?! Imagine if there had been enough houses on the market for all of those buyers to have bought as well... The price change (orange line above) over the past year is also somewhat of an eyebrow raiser. The median price has risen $25,000 in the past year. Thus, if you own a home, the value of that property may have very well increased $25,000 over the past year! Admittedly, this varies based on property type, location, price range, etc., -- but suffice it to say -- home values have increased quite a bit in the past year!! Now, just to keep you levelheaded this morning, the next two graphs might make you (and me) say "hmmm..." and "well, let's see what comes next"...  Above, it would appear that the pace of buyers signing contracts has dropped off considerably in June 2021!?!?! ;-) But don't worry too much -- I don't think!? The pace of contract signing in any typical March / April / May is usually quite (!!) active. Last year, buyer activity was significantly suppressed during those normally active months because of Covid -- we didn't know what was happening, what was going to happen, whether the housing market was going to slow down, etc. Then, buyer activity exploded in June of last year and remained quite strong throughout most of the remainder of the year. So, as you look at the decline in June 2021 as compared to June 2020, keep in mind that it was a very unusual June 2020. So, wait and see -- but I don't think June contract numbers mean that our local housing market is slowing down. And now, the second graph to make you say hmmm.....  Inventory levels have risen over the past month -- to the highest level in almost six months! This is somewhat interesting and surprising -- but I do also wonder whether it is temporary. I should also point out that this increase in inventory levels only takes us from super-super-super-super low inventory levels up to super-super-super low inventory levels. In the end, most buyers in most price ranges will still find very few choices of homes on the market at any given time. So, I think this is a wait and see -- as to whether we'll start seeing inventory levels rising again, or if this is a one month blip. Lastly, just to remind everyone of at least one of the reasons why so many buyers would LOVE to buy a house right now -- mortgage interest rates are phenomenally low right now...  Interest rates have been up and down over the past year, falling as low as 2.67% and rising as high as 3.17%. Clearly, though, anything under 4% still has to be described as absurdly low from any sort of a long term perspective. The cost of financing your home purchase will be very, very low if you are fortunate enough to secure a contract to buy a home in 2021. OK, that's all of the charts and graphs I have for you this morning. A few short takeaways from a big picture perspective... BUYERS: Get prequalified now, see new listings quickly, and carefully consider each contract term of your offer to make it as strong as possible. SELLERS: Prepare your home well, price it reasonably, enjoy a short period of time when you have to put up with showings, and enjoy likely being able to select from multiple offers with favorable terms. HOMEOWNERS: Enjoy knowing that your home value is increasing. :-) If you have questions about buying, or selling, or just want to tell me about the exciting plans you have for the weekend ahead -- drop me a line via email or call/text me at 540-578-0102. Otherwise, enjoy the weekend! | |
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All The Cool Kids Are Offering To Pay Over Appraised Value These Days |
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 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...
Hooray, the house sells for $355K to buyer #3, right? Well, probably... though if it then appraises for $300K, then none of the offer prices over the list price or the escalation clauses really amounted to anything. Thus, these days, many buyers are not only asking themselves how high they are willing to go with an escalation clause -- they are also asking themselves how much above the appraised value they are willing to pay for a house. Consider, then, the following three offers on the same house listed for $300K...
Clearly, a seller would toss out the first offer. Some sellers would then immediately jump to the third offer, since it is $10K higher than the second offer -- but -- that depends on your best guess as to the appraised value of your house. If you listed your home for $300K, presumably you think it should sell for around $300K and thus might appraise for $300K. If that is the case, then the second offer above is likely a better choice for you. That offer would stay at $325K even if the appraisal came in at $300K, whereas the third offer would start off higher at $335K but would then drop to $310K if the appraised value were $300K. So, as a buyer -- consider how much above the appraised value you are willing to pay for a house when you are competing with multiple other offers -- and as a seller, consider how an appraisal will impact each offer that you might accept. | |
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Sometimes, Appraisals Are Reining In High Contract Prices, And That Can Keep Sales Prices From Getting Out Of Hand |
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 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. | |
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All The Right Spaces In All The Wrong Places!? |
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 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. | |
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Drive By New Listings To See What Might Have Been Cropped Out Of The Photos |
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 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! | |
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Pretend The Seller Is With You When Touring A House As A Buyer |
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 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. | |
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It Is Not Possible For You To Ask Too Many Questions When Selling Or Buying A Home |
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 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! ;-) | |
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Is The Housing Market Still Crazy? Is The Sky Still Blue On A Sunny Day? |
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 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? | |
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Selling A Home Is A Sprint, Buying A Home Is A Marathon |
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 "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. | |
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Are Lumber Prices Finally Starting To Normalize? |
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 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... | |
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Home Prices Are Rising Quickly But Buyers Seem To Be Well Qualified To Buy What They Are Buying |
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 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. | |
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What Would Be A Reasonable Offer To Make On This House? |
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 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! | |
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Several Ways To Think About Appraisal Contingencies |
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 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. | |
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I Do Not Think The Housing Market Would Collapse If Mortgage Interest Rates Rose A Bit |
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 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. | |
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Creative Ways To Prepare To Buy A Home In A Market That Heavily Favors Sellers |
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 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. | |
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The Ever Speedier Pace Of Our Local Real Estate Market |
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 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! | |
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Consider Strategically Crafting An Escalation Clause Based On Your Other Contingencies |
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 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. :-) | |
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Scott Rogers
Funkhouser Real
Estate Group
540-578-0102
scott@funkhousergroup.com
Licensed in the
Commonwealth of Virginia
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