The market wearing you out? Here is an easy way to buy a house!

Let’s face it. A buyer in today’s market is going to pay top dollar for any house. There are two methods of home searching.

The way the home search usually goes for most buyers is like this: They have a search set up on Zillow alerting them when a new listing hits the market. Then they rush out to see it. Also rushing out are the 20-50 other buyers who set up the same alert. You wait in line to see it. You have 5 minutes to make a decision. You write a crazy high offer promising to do anything the seller wants short of naming your next child after them….then you lose the house in multiple offers to the buyer who was willing to name their next child after the sellers.

It is crazy out there!

Part of the reason the market is like this has nothing to do with a shortage of listings. Part of it, a small part of it, is that buyers are so focused on new listings. These days, if a house doesn’t sell immediately it is forgotten. Buyers forget about it and opt to just wait for the next round of new listings and repeat the process.

I recently had a friend looking for a house in the $250k range. We got outbid on every offer we wrote. AND WE WERE GOING WAY OVER THE LIST PRICE TOO! One house sold for $30k over the list price and got 17 offers. For that house, all you were doing was trying to outbid some crazy desperate buyer.

Know what I told my friend to do? I told her to stop focusing on new listings. I said let’s look at houses that have been on the market for at least 4 days. There are plenty of them out there. They are the ones that for whatever reason got passed over as a new listings. Sometimes it is because the presentation sucked. Sometimes it is because the price was high. Sometimes it was because the house sucked. Knowing why it was passed over is why you need a good realtor.

So, the next house we see, she decides she wants. And guess what happened? We wrote a full price offer. We put our preferred closing date on the offer. We were able to do a home inspection. It was a pleasant experience. We were also the only offer so guess what? The seller accepted it!

What’s a Buyer to do in this evolving crazy market?

When the market started heating up, the smart buyer’s agent knew to get an offer in ASAP to try to beat other agents to the punch.

Then we all started doing something like saying “Reviewing offers on such and such date and time.” That was nice because you knew that you had time to show the house. If your client couldn’t break away to see it immediately, you could tell them you could do the next day.

Now it has evolved to the point where we are saying “Reviewing offers on such and such date but the seller reserves the right to accept any offer at any time.” So we are back to dropping everything and rushing out to see a new listing ASAP.

What is a poor buyer to do right now to get a house? Make such a strong offer that the seller will want to accept it immediately. Turn the tables and make the Seller chase you! That usually involves 4 big things: Price, inspection, closing date and possession date.

Obviously for price, that means a stupid high number. I can’t believe after spending so many years blogging about not overpaying in a Buyer’s Market, that I am now suggesting people do this. But in this market, it is the difference between getting a home and not getting a home. Instead of “Go big or go home”, it is “Go big to GET a home.”

Inspection…..waive it totally if you can let yourself do it. Having dealt with probably close to 1000 inspections over the past 16 years, I can tell you that I rarely see a house with a deal breaking problem. Most of the issues that would make you want to walk away from the house are typically visible if you look. If it has old HVAC units, well, you know you will have to eventually replace them. Roof have a shingle blown up or need some flashing around a chimney? That’s not worth losing a house over. Plus, most of the time all you can get a seller to do these days is spend $1000 or so on repairs. Most of the items found on a home inspection will probably also be found where you are living now: Some electrical oddities like reversed polarity or an ungrounded outlet in older homes. Various plumbing leaks. A roof, HVAC units or water heater somewhere between new and needing replaced. Most of what is found on a home inspection is deferred maintenance.

A lot of sellers have already bought another home and know when they will be closing on it. Ask their agent what the ideal closing date would be for the sellers. If you can make it work, you have just made your offer much more appealing to them.

Same with the possession date. It’s a pain in the rear to have to be out of your old place the same day you get in your new place. If the house was in reasonably clean shape when you saw it and you don’t think the sellers are terrible people, ask if they need a couple of days to stay in the house after the closing. Some breathing room is always nice. The worst I have seen when this happens is that you often get left some garbage or a dirty house. Most sellers are eager to get to their new place so you don’t really have to worry about them not moving out.

All of these things are a little risky to a buyer. I know. I get it. But the people that do these things are the ones who are going to be moving into that house you fell in love with and were outbid on.

When to walk away after the home inspection

The home inspection is the toughest part of a sale I think.

It can be hard to get past the condition, even a house that inspected pretty good, since your inspector gave you an entire book containing everything that is wrong with what is about to be the biggest purchase in your life.

What I try to tell my buyers is that no house is perfect. They are all in various stages of Mother Nature trying to destroy the home and reclaim the property. Everything has a life span and given enough time, everything on a house will need replaced or some maintenance.

I’ve probably been the Buyer’s agent on well over 400 inspections and gotten repairs lists for hundreds of listings I have had. Know what I have found? Most of the issues that turn up from a home inspection are either deferred maintenance or things that the inspector noted were done a little less than textbook perfection.

Here are some things that are on almost EVERY home inspection report: Windows or door that need caulking, faucets that drip, loose outlets, cracks in sidewalks and driveways, downspouts that are not out far enough away from the house, air conditioner condensation lines that drain too close to the house. Minor plumbing issues are common. Minor electrical issues are common. Often the flashing on a roof needs some attention. Older houses tend to not have grounded outlets. Few houses have weepholes in brick to allow moisture behind the brick to escape. Few houses have flashing where a gutter ends at an exterior wall to prevent water from splashing on the side of the house………and the home inspector I recommend always seems to find loose toilets, lol!

I think the hardest thing for buyers is that they think they have picked a loser house when they have 20-30 of these common issues. It is easy to assume that the house you picked to purchase is the only one with these issues. That you can walk away from this one and the next house you buy will be perfect. I don’t know how successful I have been at convincing my buyers of this, but I normally tell them that 80-90% of the same issues found on their house will be found on any house. I have also joked that there needs to be a rule that the inspector has to inspect the Buyer’s old house first, and anything found at their old house can’t be asked to be repaired at their new house.

Since the topic of this is when to walk away, I guess I better get into that.

If you are a first time buyer or don’t have a lot of money, I guess you walk away if the the big ticket items don’t have much of their lifespan left. If you have a 22 year old roof and won’t have any money to replace it in the next few years, it might be best to walk away.

If you have a house with a problem such as a major structural issue that will impact your ability to sell the house to the next buyer when you move, might be good to skip that house.

When I bought my current home, I had it inspected. It had all the usual issues. I did the inspection type that is very common in this hot seller’s market: I could inspect it but wouldn’t ask for repairs. I would take it or leave it. I of course chose to take it because to be honest, I loved the property so much that there wasn’t anything that was going to deter me from living there. I had all the usual items. Being a landlord, realtor and middle aged man who has owned lots of homes, there was nothing that scared me nor surprised me. It was just a “To-do” list that I prioritized and am getting it all sorted as I find time. Which brings me to something else I tell my buyers. If you will encounter pretty much the same items on any house, why not just stick with the sale of the one you fell in love with after looking at all the other houses you had to pick from? This is especially true in today’s market where you have so few choices and odds are you will pay even more for the next house as prices go up while you wait for it to come on the market.

Is it a good time to buy?

This is a question I get asked a lot these days. People are worried about a housing crash and they dread the process of finding a home. It is not a fun time to be a buyer for sure!

My response usually is “Today is a better time to be a buyer than tomorrow will be, but it isn’t as good as it was yesterday.” Prices are going up every day between the whole supply/demand thing and inflation. I don’t see an end in sight short of some major economic crisis that creates a lot of unemployment and/or skyrocketing interest rates. (And keep in mind that we DID just have a major unemployment situation in 2020 due to COVID.) Even if either happens, there will be more buyers than sellers since people will simply decide not to move from their current home, which will create an even more out of balance supply/demand situation.

All this is pretty wild compared to 6-7 years ago. Back in 2014 I bought a rental house that had been on the market for more than 6 months. I was the only buyer and I offered much less than the list price and the seller was happy to accept it. I just sold that house for more than twice what I paid for it. Granted I did paint it, put new carpet in the bedrooms and replaced 3-4 windows over all those years.

So, if you are on the fence about entering the market, I say go for it. Sure, you will pay top dollar. You will probably have to bend over backwards to get a seller to even consider your offer. You might lose a few houses along the way. But what is the alternative? Keep renting? With all this inflation we are seeing, your rent is soon going to go up. And it will always keep going up. Meanwhile, the principal and interest part of your mortgage payment will always stay the same. All that can change in your payment is the property taxes and insurance amounts you pay.

How you protect yourself when buying in a Seller’s Market

We all know the market is hot. Who hasn’t heard about houses selling for over the asking price, buyers waiving the chance to inspect a home. Lots of crazy things happening these day. People feel lucky just to get a house. Any house!

How can a buyer protect themselves these day?

Know the value of the house before you make an offer. The market is moving so fast right now that I don’t think many buyers or their realtors are looking at recent sales in the area to see what that hot new listing is worth. You can’t rely on the Zestimate. You can’t think that it must be worth it if it appraised. Appraisers are not buyers. The criteria they use to justify value is different that what a buyer uses. They don’t care about fancy finishes. They don’t appraise a view. To them it is all about numbers like square footage and room count. They have a 1-5 ranking for condition. Almost all houses you see are either a 3 or a 4. Buyers care about trendy finishes like how wide the planks are in the wood flooring, if the counter top is quartz or granite, what the tile in the shower is like. The tile in the shower could be carerra marble or green ceramic tile and the appraiser is going to value it the same.

Know the neighborhood. Let’s face it. When you buy a house, you are also buying the neighborhood. That means the part of town it is in, the amenities that are close, the school district, the parks, how close it is to a grocery store….all impact the value. Right now with such demand, there is not a lot of pricing difference between the most desirable neighborhood in any price range and the second most desirable neighborhood. There will be though in a cooler market. Picture this. There is a time in the future where houses stay on the market for more than a day. There are 3 houses for sale in the most desirable neighborhood and 3 for sale in the second most desirable neighborhood. There are 4 buyers. I think you know how this goes. There will need to be a pricing difference between both neighborhoods to make anybody pick the second most desirable neighborhood. That is how all markets work. If the store brand Mac & Cheese was the same price as the Kraft Mac & Cheese, nobody would buy the store brand with it’s grainy fake cheese and unattractive packaging.

Keep calm and think about your exit plan. You will one day want to sell the home you just fought so hard to purchase. Unless you are the luckiest person in the world, odds are you won’t have it as good as the seller did when you were the buyer. I cannot tell you how many people called me to sell their homes in the Great Recession who told me they paid full price in multiple offers for the house that nobody wanted when they needed to sell. If a house is totally average, has an average floor plan, has an average lot and is in an average neighborhood, don’t pay above average money for it. Personally, I think the only house I would yield to the will of the seller would be one that had something special that will also make it rise to the top of any buyer’s list in any market.

That is how you protect yourself in these crazy time.