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 we’ve noticed another trend. We’re moving a lot of people’s furniture and personal possessions into our storage and they aren’t moving out. It’s crazy. You’d think the pandemic would make for a buyer’s market and less competition, but there’s a low inventory.
It turns out what we’re 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 they’re having trouble finding new homes. If you’re in a personal real estate slump while the real estate market is soaring, here are some tips to help you out if you’re 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 don’t 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 don’t want to spend time showing property to buyers unless the client is pre-approved for a mortgage, especially in a seller’s 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 that’s 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 don’t 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, don’t make any major purchases until after you close on your new home.
Find a good Real Estate agent
Being a real estate agent in today’s 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 seller’s 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 don’t let a real estate agent push you into a decision, even in a seller’s market. If a home doesn’t feel right, it might not be.
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 can’t change a home’s 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 don’t 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, you’re 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 that’s often just the list price!) is out of the question for most people, but if it’s at all possible, it will put you closer to the head of the line. That’s a big advantage in a hot market or seller’s 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 won’t 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.
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 it’s 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:
Before waiving the financing contingency, even in a hot market, be sure everything is in order and that you will qualify for the loan.
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 seller’s market, is that appraisers generally sign off on contracted amounts as long as they aren’t too far above comparable sales. Your real estate agent should pull all the “comps” 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 today’s 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.
In most markets, buyers look at at least 10 homes before finding “the one.” In a buyer’s market, it may be less because there is less competition. But we’re not in a buyer’s market. Both buyers and sellers seem like they’re 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.