In the early months of the pandemic, it seemed the world ground to a screeching halt. Since moving companies were considered essential, Ace Moving stayed open, but things were slow.
Today, things are completely different, but weâve noticed another trend. Weâre moving a lot of peopleâs furniture and personal possessions into our storage and they arenât moving out. Itâs crazy. Youâd think the pandemic would make for a buyerâs market and less competition, but thereâs a low inventory.
It turns out what weâre experiencing is very common in our near post-pandemic world. The real estate market is going crazy for both buyers and sellers. Not just here in the Bay Area, but everywhere. Our moving customers are selling their homes for record amounts of money but theyâre having trouble finding new homes. If youâre in a personal real estate slump while the real estate market is soaring, here are some tips to help you out if youâre thinking of buying a home.
Get a feel for the real estate market
Bay Area median real estate prices are soaring. Homes are moving faster and for more money in this housing market than before the COVID pandemic. You donât want to spend much time window shopping for homes because you could end up being priced right out of the real estate markets, but inform yourself. Look at how much homes have been selling for in our hot real estate market, not just their list price.
Have your finances together
While there might be some exceptions, most Realtors donât want to spend time showing property to buyers unless the client is pre-approved for a mortgage, especially in a sellerâs market. A mortgage broker will need to see paycheck stubs, tax statements and bank statements before agreeing to issue home loans.
Ideally, you should put 20 percent down on your new home, but if thatâs not possible, you might qualify for an FHA loan, which requires only a minimum (depending on your credit score) downpayment of just 3.5 percent.
You donât need perfect credit to purchase a home, but the better your credit the better your rate. You can save a significant amount on your monthly mortgage payment by cleaning up your credit as much as possible, and by all means, donât make any major purchases until after you close on your new home.
Find a good Real Estate agent
Being a real estate agent in todayâs housing market is about so much more than showing homes to buyers. A good Realtor is knowledgable about the area, including list prices vs. selling prices. They know how much homes sell for, but perhaps most importantly, they know how to fill out paperwork and how to word an offer in a way that might way that might appeal to the sellers, even in a sellerâs market.
Ask lots of questions. Ask for references, especially from fellow buyers. Make sure your agent is a member of the National Association of Realtors. And donât let a real estate agent push you into a decision, even in a sellerâs market. If a home doesnât feel right, it might not be.
Create lists
Create a list of must haves and want to haves, then go through it again and again. You might need three bedrooms, but is a third bathroom absolutely necessary? While you canât change a homeâs location, up and coming areas are generally less expensive than areas that are already there. And in a hot market, neighborhoods change quickly. That said, if you have children, you may be better off finding a workable house in a good school district.
Learn to compromise in a hot market
Sure, it would be great to find a move-in ready home, but donât let weird wall colors, outdated appliances or lack of curb appeal dissuade you from buying a home. If you find a house that mostly suits your needs, but will need some renovation, ask a contractor to take a look. You may find that a home that needs some work will save you money in the long run. Also, youâre less likely to be caught in a bidding war (multiple offers) on a home that needs work.
Pay cash if you can
Sellers love cash offers, and quite often they will accept less in a cash offer than they will when banks are involved, especially in multiple offers situations. Yes, we realize that paying around a million in cash (and thatâs often just the list price!) is out of the question for most people, but if itâs at all possible, it will put you closer to the head of the line. Thatâs a big advantage in a hot market or sellerâs market.
The disadvantage to cash offers
For most U.S. taxpayers who own homes, their biggest tax deduction is their mortgage interest rate. Of course, if you pay cash for your home, you wonât have to worry about interest payments. If you need cash later on, you will have your home to borrow against. Beware: Having someone else, like your parents, loan you the money is one way you might get around getting a real estate mortgage, but if they gift you the money, you will need be hit up with a significant tax bill.
Waive contingencies
It seems wrong that in hot real estate markets buyers almost have to waive contingencies. We advise that you should always get an inspection, but itâs probably a good idea to bring an inspector along on a viewing before you put in the offer.
Other real estate contract contingencies buyers should waive include:
Financing
Before waiving the financing contingency, even in a hot market, be sure everything is in order and that you will qualify for the loan.
Appraisal
Before a bank will approve your real estate loan, they will have someone appraise the house. If you waive the appraisal contingency, you will have to be prepared to make up the difference between the appraised value and the contracted sale value.
One advantage to buying in hot real estate markets, or specifically, in a sellerâs market, is that appraisers generally sign off on contracted amounts as long as they arenât too far above comparable sales. Your real estate agent should pull all the âcompsâ or comparable homes that have sold before you make an offer.
Write a letter to the seller
Writing a letter to the seller might seem quaint in todayâs virtual world, but it can work. Many sellers want to know that their home is going to people who will love it as they have.
Be patient
In most markets, buyers look at at least 10 homes before finding âthe one.â In a buyerâs market, it may be less because there is less competition. But weâre not in a buyerâs market. Both buyers and sellers seem like theyâre in a rush, but with median home prices of more than $1 million throughout the Bay Area, it might be worth waiting. Then again, interest rates are at historic lows.
