Get ready to embark on a house-hunting adventure filled with excitement and a touch of frustration! The housing market is still facing a shortage of homes for sale, which is not meeting the high demand from buyers, especially as we are experiencing the largest generation of homebuyers since the Baby Boomers (S&P/Case-Shiller). In fact, housing inventory is at one of its lowest points in 40 years, with less than a 3-month supply of homes on the market compared to a “healthy” supply of 5-6 months, according to the National Association of Realtors. This creates a highly competitive environment for buyers, resulting in multiple offers on many listings and homes selling above their list price.
Economists predict interest rates will drop in the third and fourth quarters of this year, followed by another decrease in the first half of 2024. Many buyers are eagerly anticipating this decline in rates, although it will introduce additional competition in the market. The projected rate dip should boost homeowners’ confidence to sell, leading to an increase in new inventory entering the market.
It’s worth noting that homes have appreciated in value for 73 of the last 80 years (S&P/Case-Shiller), which means that housing IS a sound investment where your money can grow, particularly in Northern Virginia.
Placing an offer on a home requires careful consideration and there is a lot to consider in a seller’s market where you’re bidding against other buyers. Act swiftly when you find ‘THE HOUSE’, while also taking steps to make your offer stand out. Show the seller your seriousness as a buyer by demonstrating your willingness to go above and beyond, both in your intentions and financial terms. Here are a few strategies that you might consider when making an offer:
- Submit a more attractive offer by waiving contingencies that are not absolutely necessary. We prioritize evaluating recent sales, listing price, and property condition to provide our clients with the best possible protection.
- Offer above asking price. To win a bidding war, you need to make a strong offer. We provide clients the necessary information to help understand the value and feel comfortable with the offer price.
- Use an escalation clause to increase your offer gradually above other bidders. This helps your offer price go above and beyond other offers without increasing the price unnecessarily.
- Put down a strong Earnest Money Deposit (EMD) to demonstrate your commitment to the seller and strength of funds in the bank. The EMD, typically 1% to 2% of the home’s purchase price, will be applied to your down payment.
- Get an appraisal waiver from the lender. When putting a large down payment the property may be eligible to have the appraisal waived which allows you to submit the offer without an appraisal contingency. This is property and client specific based on your qualification with the lender. This can make a big impact on the seller’s decision so they won’t need to worry about the appraisal value falling short of the contracted sales price; especially if the sale price is increasing above the list price.
- When purchasing a home with a mortgage, your new mortgage payment isn’t due until a month after your closing date; Why not offer the seller the option to “rent back” for free or at low cost to sweeten the deal? A seller could benefit from you paying their “rent” for a month, and may give the seller peace of mind about moving out at a slower pace.
- A typical closing period is 30 days, but certain lenders are capable of closing within two or three weeks. This expedited closing can be an attractive incentive for sellers to choose your offer over another.
Depending on the property and other competition, there are additional tactics to consider to make your offer more attractive to a seller. Staying informed about the latest market trends is key, and that’s where we come in as YOUR local Realtors with trusted sources of information and guidance. If you’re thinking of making a move give us a call to discuss and strategize!