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Image from Unsplash
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Image from Unsplash
Homeowners were getting 15 to 20 bids when selling their houses last year, and generally the deal was done within a matter of 24 to 48 hours. Buyers were getting outbid left and right, and escalation clauses had them agreeing to pay more to keep up with demand.
“I’ve been in the business 35 years. I’ve seen the ebbs and flows in the market through the years. But what was different, what we’ve never seen, is these multiple offers, these escalation and gap clauses,” says Berkshire Hathaway real estate agent Leslee Salhany.
As of February 2023, the market has cooled off a little bit, but there are still about seven or eight bids coming in on some houses. “It’s the ones that are the shiniest apple in their tree [that get] multiple bids,” Salhany says.
There are fewer cash offers now than before, more offers with Federal Housing Agency loans are being accepted and fewer buyers are forgoing home inspections to sweeten the deal.
“Last year, we saw so many buyers waiving their home inspection. It was concerning. … But now the buyers are doing home inspections. I’m so happy,” Salhany says. “The current housing market is still very good.”
She offers some tips on how homebuyers can navigate the hot housing market.
First Timers
If you’re shopping for your first home, Salhany recommends you meet with a real estate agent for a buyer's interview, where an agent can explain the homebuying process. This usually takes about an hour and a half, and agents can point you toward loans you might qualify for, such as a heroes loan for first responders or loans for buying in certain areas.
Some people aren’t sure if they want to work with an agent, but Salhany recommends it since they can provide information on listings that is more up-to-date than resources like Zillow.
Once you get further into the homebuying process, it’s essential to not alter your financial status by making big changes like buying a car or opening a credit card.
“That can totally start them back at Ground Zero, or disqualify them,” Salhany says. “Even the day that you’re ready to close — I had a client go buy a car that morning … and they didn’t get the house.”
When making an offer, you might consider setting money aside for an escalation or gap clause. Escalation clauses set aside money to outbid any outside offers during the purchasing process, and gap clauses pay for the difference between the appraised value of a house and the listing price.
Don’t panic during the inspection process. Keep in mind that some problems can be easily fixed and that it’s important to pick your battles.
“That home inspector has to find everything wrong with that house from A to Z. And once you’re done, you’re just like deer in the headlights,” Salhany says. “It is unsettling, and that’s why you need a good real estate agent to guide you.”
Seasoned Homeowners
If you already have a house but are looking to sell it and buy another, knowing where to start and whether to buy or sell first can be tough.
“If you own this house and you’re like, What do I do? What comes first, the chicken or the egg? … There’s different ways you can do it,” Salhany assures.
One thing to consider is a bridge loan.
“It gives you the availability to go purchase another home without the sale of your home,” she says.
Most banks will give you 80 percent of your equity in your home, pay off your mortgage and bridge over 80 percent to the new house. This is a popular option during this hot market.
Bridges weren’t as common before when houses took longer to sell, but now that most houses for sale below $600,000 stay on the market for up to two weeks, you might consider it.
Whatever route you take, make sure that even during the chaos and competition of the homebuying process, you are looking ahead. The house you’re buying should be big enough to accommodate you and your family for years to come.
“Buy for the future,” Salhany says, adding that you should keep in mind that you can always do home renovation projects to make your house what you want it to be down the line, so don’t be too picky when it comes to aesthetics, especially in this competitive market where you could overpay.
“You can change your decor, you can change cabinetry, you can change the lights. Once you do all that, it’s a whole different look,” Salhany says. “The diamond in the rough — that's the one you should look for because that's gonna be more bang for your buck.”
