The home-buying market this spring is not for the faint of heart.
The main challenge is that the supply of homes for sale in most parts of the country continues to fall far short of demand. That is pushing up prices to heart-stopping levels in many markets. A lack of construction over the past decade, plus pent-up demand from pandemic shutdowns, has unleashed a national seller’s market. The median price for a single-family home rose about 18 percent in March to almost $335,000, a record high, according to the National Association of Realtors.
Daryl Fairweather, the chief economist for the Redfin online brokerage, said homes being listed for sale are selling quickly. About half sell in less than a week, usually after multiple offers.
The usual tips — like getting preapproved for a mortgage — apply more than ever. But competition in many cities is leading potential buyers to take steps they may not have considered even a few months ago, including offering tens of thousands of dollars above the asking price; agreeing to let the seller live, rent-free, in the house for several months after the closing; and waiving certain contingencies, like the right to inspect the house before buying.
Waiving inspections has long been common in competitive housing cities like Seattle, but it is becoming more frequent elsewhere, real estate professionals say.
Buyers will sometimes send personal notes to sellers to distinguish themselves from others vying for the same property, though some Realtors discourage the practice. Such “Dear Seller” letters include an introduction to the buyers and copious compliments about the house.
Mark Strüb, a real estate agent in Austin, Texas, sometimes invites buyers to write the letters, he said: “It never hurts.” He said he once had a seller with a strong sentimental attachment to the house pass over the highest offer because the potential buyer failed to write a letter, while the others vying for the home had all done so.
But agents often discourage sellers from reviewing such letters out of concern that the letters may reveal details about a buyer’s family status, race or religion that could inadvertently cause sellers to run afoul of fair-housing laws in their decision-making.
“It can actually backfire,” said Francine Viola, an agent in Olympia, Wash.
Buyers may note, for instance, that they look forward to gathering around the fireplace on Christmas, or that they find the home attractive because it is near a mosque. Should the seller be influenced by those details, the thinking goes, other buyers whose offers were rejected could potentially challenge the sale, claiming that they were victims of religious bias.
The Realtors association issued guidance last fall recommending that agents avoid using “love” letters. “Seemingly harmless,” the association said, “these letters actually raise fair-housing concerns.”
Bryan Greene, the association’s vice president of policy advocacy, said in an interview that the practice had been flagged out of an “abundance of caution” and that he knew of no specific lawsuits resulting from the use of seller letters. Still, he said, it’s an area where agents should “tread carefully.”
In some states, buyers may offer direct incentives to sellers outside of the purchase price, sometimes called “option” money, said Maura Neill, an agent with Re/Max Around Atlanta. “It works like a bonus,” she said, noting that the practice is allowed, although not necessarily widely used, in Georgia.
She cautioned that buyers and their agents should clarify their state’s laws, but “if you can make it work,” she said, “it’s a very strong tactic.”
Shoppers need patience, plus a willingness to move fast, Ms. Neill said. Kim Secia, a technical support director for an online education company, said she began working with Ms. Neill in January to find a home in Atlanta’s midtown district. She was preapproved for a loan with a local lender and found a property she loved, but she hesitated when Ms. Neill urged her to make an offer immediately.
“It was the first one I saw,” Ms. Secia said, and she wanted to look around. That, she learned, was a mistake. The house sold quickly, and weeks passed before another suitable property became available. This time, she was ready, and agreed to offer above the asking price.
“I knew I had to pull the trigger,” Ms. Secia said. She lost out to another buyer, however — probably someone making an all-cash offer, she said.
At the end of April, a condominium near Piedmont Park went on the market. Ms. Secia offered a quick closing, which was important to the sellers, and agreed to waive the appraisal — also an increasingly common practice in competitive markets. That means that if a buyer is financing the purchase with a mortgage and offers more than the property appraises for, the buyer agrees to pay the difference in cash at closing. That didn’t happen, Ms. Secia said, but it added another level of stress.
In the end, the sellers accepted her offer, and she closed on the condo on May 7. She learned that the sellers liked that she had shown up promptly to an appointment, which helped seal the deal. “Be on time,” she said. And, she advised, use an experienced real estate agent. The current competitive market moves too quickly for do-it-yourself shopping.
In Nashville, buyers are getting creative. Brian Copeland, the president of Greater Nashville Realtors, said he had recently learned of an offer that promised the seller a “V.I.P.” meet-and-greet with a celebrity musician as an inducement. In another sale, a buyer offered to pay for a party with a bounce house for the seller’s children. And in a third, the buyer saw a Peloton bike in the house and offered to pay for a year’s subscription to online classes.
“We’re seeing all kinds of weird perks,” Mr. Copeland said, noting, “I am not condoning any of these practices.”
Angelica Olmsted, an agent in Denver, said tight markets demanded creative thinking. She tracks listings that have expired to see if the owner might still be interested in selling. “It may have been overpriced eight months ago,” she said, “but now it’s a steal.”
Here are some questions and answers about home shopping:
What are current mortgage rates?
A bright spot for home buyers is that mortgage rates have remained low — below 3 percent, on average, for the past month for a 30-year fixed-rate home loan, according to Freddie Mac’s weekly survey. Rates for fixed-rate 15-year loans averaged 2.26 percent last week.
I can’t pay above the asking price. Is there any hope for me?
Yes — if you’re willing to compromise, agents say. Mr. Copeland, in Nashville, said the majority of homes in Davidson County were still selling at or below the asking price. The most extreme competition, he said, is in a few ZIP codes in the city’s urban core. If you can live a bit farther away, he said, there’s probably a home you can afford.
How long is this going to last?
It is going to take time for construction to catch up to demand, especially for entry-level homes, economists say. But there are some reasons for optimism. A recent survey from Realtor.com suggests that more owners will be putting homes on the market in the next 12 months as the effects of the pandemic wane.
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