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Covid-19 and the real estate market: 5 tips to help buyers win in a seller's market

Deana Devereaux • June 17, 2021
      This last year could be considered one of the strangest in our recent history. For months, we lived in uncertainty and chaos. We experienced history-making events seemingly every single day. Eventually, the world started to stabilize. We began to figure out how to do this whole pandemic thing. We got used to being at home, maybe even enjoyed being at home and spending more than a few hours a day with our families. One thing that didn't settle into a routine or return to normal was the real estate market. Since the pandemic, the real estate market has been booming. What once was a buyer's market is now a seller's market; homes are receiving countless offers before even going on the market, for tens of thousands over asking! What's going on, and how do buyers win in this market? We'll get into it. 

What’s going on in this market: 


     Over the last year, home prices have risen by over 9%. Why? Classic supply and demand. Interest rates dropped to crazy low levels; they hit 2.65%! In addition to interest rates, COVID forbearance and reduced spending on travel and leisure allowed more first-time home buyers and buyers who were on the fence to enter the market. In fact, 2.38 million people or 14% of homebuyers in 2020 were new-home buyers. With an influx of new homebuyers, less homes are going on the market.   


     In addition to new-home buyers not having a home to sell, many people who would have put their home on the market, decided not to.  Many factors contributed to potential sellers deciding against selling their home. During a pandemic, there was certainly a fear of strangers walking through the house. Some sellers decided to renovate instead of selling. Additionally, some potential sellers may have decided to stay in their homes and neighborhoods due to no longer having to commute.


     In short, homes are scarce. Buyers are willing to offer as much as possible, waive inspections, waive appraisals and a whole gamut of things to make their offer stand out. So, how do you succeed in this market? What are some things buyers should do to make their offer stand out and win? We have a few suggestions for first-time homebuyers to consider when submitting offers. 


1.     Narrow down a list of essential features or things your future home needs to have.

     In a seller’s market, homes go fast. Often, buyers won’t have time to schedule a showing before the house is under contract. It’s important to know your must-haves in a home so you and your realtor can focus your search and jump on a home as soon as it comes on the market.


2.     Offer what you can upfront. 

     It's best not to lowball or bargain out of the gate. You are competing against multiple other buyers for the same home. The other buyers may appear more motivated because they’re offering their whole budget up front. If you’re uncomfortable offering your whole budget upfront, you can write in an escalation clause into your offer.  An escalation clause says that you’re willing to up your offer by x amount if another offer comes in above yours. This is a great way to show a seller you’re serious without laying all your cards on the table.

3.     Write a letter 

     Writing a letter to the sellers about your journey and what stood out to you about the home might help the seller choose your offer over other offers. After all, a home is very emotional to many people, and sellers are people too. Many want to make sure their home is loved, treated well, and going to someone they feel connected to. 


4.     Sweeten the deal with a rent-back or additional earnest money 

  • Rent-backs: You can also make your offer stand by offering the sellers rent back. A rent-back allows the sellers to stay in your new home for a specified amount of days in exchange for per day rent payment to you. This can give sellers peace of mind. It’s important to remember that the sellers are also buyers in this market, and the sellers likely did not expect their home to sell so fast. A rent-back allows them extra time to find the right home and get their offer accepted. 
  • Additional Earnest Money: You can sweeten your offer by providing more earnest money to the seller. Earnest money essentially is a deposit, a lot like a security deposit in a rental, except you don't get it back. Even sweeter, if you are 100% sure about the home, releasing the earnest money to the seller earlier than at close could help your offer stand out. This is especially true If the seller is money motivated; the opportunity for the seller to receive some funds before the close of the home might get your offer accepted over other offers. 

1.     Get your pre-approval and financing 100% ready. 

     There is nothing like losing out on a home because you're financing isn't in order. Financing is a crucial first step of the home buying process. Get your financing in order before you even think about putting an offer in on the house. You'll be better off for it! 


Remember, it's a tough market out there. Don't get discouraged; the right home will come along! 


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AFFECTING THE MORTGAGE INDUSTRY? NEW LAWS 2022

By DEANA M. DEVEREAUX • June 21, 2022
It’s important to stay up to date on the ever-changing landscape that is the mortgage industry. It’s possible that the newest laws passed by congress, Fannie Mae, and Freddie Mac could affect those looking to get a mortgage, or refinance in the coming months. We’ve put together all the latest on the newest and upcoming mortgage laws affecting the industry. Additional due diligence for condo buyers If you’re looking at buying a condo that is 20 years or older, you may have to jump through a few extra hoops before signing the final loan docs. Conventional loan buyers will have to go through an additional due diligence process that includes obtaining answers on safety, soundness, structural integrity, and habitability of condos from the condo association before the loan can be processed. If you’re looking at a condo this spring, it’s best to get prepared now. While this extra due diligence step is a pain, it’s in your and your lenders best interest. This extra due diligence step was born out of the devastation of recent condo building collapses in the U.S. New fees for vacation home financing and high-balance loans If you thought 2022 was the year for. A second home, vacation home or jumbo upgrade, it may still be but you’re going to be looking at additional fees. Upfront fees for these types of loans are expected to increase between 1.125 percent to 3.875 percent. Fannie Mae and Freddie Mac explain that these increases in the second home market are to keep first-time homeownership rates low and facilitate equitable and affordable housing. You can still buy down these increases with points just like you can buy down an interest rate. This rate increase comes as we saw the housing market skyrocket and borrowers take on additional debt to compete in this hot market. Self-employed borrowers rejoice – loosened regulations Thanks to the pandemic, the number of freelanced workers has increased. The good news keeps on coming because lending criteria has relaxed for self-employed borrowers. The COVID-19 pandemic saw an increase in requirements for self-employed borrowers. If you’re a freelancer, you no longer need to provide year-to-date profit and loss statements and three months of bank statements. We’re back to the good old days of using tax returns to show income! If you’ve been waiting to buy a home because you’re a self-employed borrower, now is the time! In the past, borrowers had to show creditworthiness through any number of on time loan payments including credit cards, first mortgage loans, car loans and more. The strict creditworthiness requirement affected many buyers that did not have credit cards, mortgage loans, or car loans. Now your mortgage loan provider can use a verification tool to check bank deposits for on-time rental payments, and other creditworthiness information. Say goodbye to mounds and mounds of paperwork proving you pay your loans on time!

DO YOU REALLY NEED A REAL ESTATE AGENT?

By Deana M. Devereaux • June 14, 2022
 The real estate agent that you’re working with to buy your home should be your advocate. You want to ensure that they are aware of all risks and benefits associated with the property you’re looking to buy. There is a major benefit in having a good real estate agent because they can ultimately help you make money on the purchase of your home in the long run. If your agent shows you homes where you could add an additional bedroom or bathroom or they show a property where you could finish the basement, they’re helping you gain equity in the property. On the flip side of that, if they don't understand your search area and they show you a home that is overpriced and they suggest that you go in over the true value of that home, you’re losing money on the transaction. It’s important to work with someone that you trust to guide you through the process and help you make decisions that will help your bottom line, not hurt it.

THE INS AND OUTS OF FINANCING A 2ND HOME

By DEANA M. DEVEREAUX • May 23, 2022
Step 1 – Decide How You’re Going to Use the Second Home Your down payment requirements and loan types will differ depending on what you plan to use your second property for. For example, do you plan to use it as a vacation home, secondary residence, or full-time rental property? A vacation home or secondary residence may qualify for a conventional home loan. When qualifying for a second conventional loan, the process is much like your first mortgage except you will be required to put down 10 percent. If you are purchasing the home to use as an investment property or full-time rental, you won’t qualify for certain loan types such as FHA or VA loans. You will also be required to put down a larger down payment than a vacation home or secondary residence. In addition, you may have to meet stricter debt to income ration requirements. All hope is not lost though! You can still qualify for a vacation home or secondary residence if you plan to rent the home out on apps like Airbnb. Typically, you must occupy the home for some portion of the year, and the home must be a one-unit home that can be used year-round. We can help you figure out what loan type you qualify for. Step 2 – Save For Your Down Payment There are multiple ways to complete this step. You can save the traditional way and put away a portion of your paycheck every month. You can also use the equity in your primary home to fund the down payment of your second home. There are multiple programs available such as: · Cash out refinance: A cash out refinance allows borrowers to borrow up to 80% of their home’s current value. The only caveat with this option is that your primary home’s monthly payment will increase. · HELOC: A HELOC, otherwise known as a Home Equity Li ne of Credit. This avenue differs from a cash out refinance because you are not refinancing your primary home’s mortgage. This is a good option if current interest rates are higher than your primary home mortgage interest rate. The last thing you want to do is refinance to a higher interest rate!
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