Buying in a hot market
Before COVID (B.C.), the housing inventory was relatively tight and we were anticipating Spring 2020; excited to market new listings and ready to help buyers find their perfect home. And then real estate shut down for several weeks while we focused our attention on staying safe and healthy. While real estate was ultimately deemed an essential service, it wasn’t until the region entered phase 2 and agents were given permission to conduct in-person meetings (with social distancing and mask wearing) that activity resumed in earnest. Almost right away, the area saw an uptick in listings and, along with that, an increase in pending sales.
It’s not unusual for buyers to plan six months to a year in advance of a move; whether they are saving towards a down payment or waiting for their lease to expire; and many who were expecting to buy a house early this spring are now competing with buyers just entering the summer market. There aren’t a lot of homes to choose from and when a good option hits the market, buyers have to act quickly and may end up in a multiple offer situation. While we don’t have a magic solution for eliminating this situation, we do have some recommendations to help our buyer clients navigate the frustrating aspects of this market.
Start early: If you have the flexibility, start looking before you “have” to move. If you need to close on the perfect house before your lease ends, it might mean two housing payments that month but that will be less hassle than the alternative. Don’t get discouraged if you have to make offers on a few homes before going to contract. While it’s hard to see clients disappointed at losing out on a house, it’s almost always the case that another home that’s an even better match comes along. It’s easier to be patient when you aren’t overly stressed.
Get pre-approved: While it’s always been a good idea to have a pre-approval letter on hand before viewing homes, with the onset of COVID-19, many listing agents are now requiring buyers to provide documentation prior to confirming showings so as to reduce the casual traffic through a home. Getting pre-approval can be accomplished on-line or with a brief phone call to the lender of your choice. Check this task off your list and then you can focus on getting out and seeing homes.
Work with a full time Realtor (or two if you work with us!): This is not the market to hire someone who has a day job or is only available at certain times and it’s not the time to go it on your own. A responsive agent who is readily available to show you potential homes is always important but it’s crucial in a market when homes are going under contract within hours of being listed.
Develop a list of “must haves” (and its corollary - have a list of “optional features”): This can happen over time and it’s not necessarily a static list but it is helpful to be clear about which house features are mandatory and which are negotiable. It’s unlikely you will find a home that has absolutely everything you want so it’s useful to distill what really matters.
Know what the house is worth: In a seller’s market, homes may be priced at a premium and it’s important to know what the house is worth TO YOU, before you make an offer. We complete market analyses for each home clients want to make an offer on. Sometimes we determine the home is worth asking price (or more) and sometimes we counsel buyers to offer less than asking. While recent market activity largely determines home value, there are also other factors to consider. Perhaps you are willing to pay a premium for a home that is in great shape or in a perfect location or maybe you don’t care as much about getting a deal because you expect to be living in the house for a long time.
Know your top number: This may be different for each home, but before you make an offer, figure out what is the most you would be willing to pay for that house. Especially in a market where multiple offers are common, you want to have a top threshold in mind in case your hand is forced. This doesn’t mean you have to offer that number initially, but it’s good to know what it is.
Have an offer strategy: What you offer on a house depends on how long it’s been on the market and whether you are competing with other buyers. While price is the biggest part of the negotiating process, there are other negotiable terms (closing date, financing details, structural contingencies). Before drafting an offer, we work with clients to make sure their offer strategy maximizes their chance of acceptance.
We aren’t going to say that buying a home is easy right now, but with the right information and professional assistance it is a very achievable goal!