One of my colleagues described the current real estate market as The Hunger Games for Home Buyers. Perhaps we should say “May the odds be ever in your favor” to our clients whenever an offer is submitted on their behalf.

Yes, the real estate market is more competitive

According to the National Association of Realtors (NAR) Economist’s Blog, there were “4 Offers for Every Home Sold in February 2021.” A year ago there were 2-3 offers for very home, so the competition has increased. In addition to buyer offer competition, nationally homes are being sold in a median of 20 days.

Nationally there were a total of 1.07 million homes for sale in January 2021 which is an estimated shortage of 2.7 million homes required to “balance” the market. “A balanced housing market is one that requires the inventory of homes for sale to be equivalent to about six months of the monthly pace of demand,” NAR. In Massachusetts February 2021 showed the lowest number of single family home and condominiums for sale since the Massachusetts Association of REALTORS began reporting the data in 2004.

Besides making it hard for buyers to find properties to purchase home prices will likely continue to rise until the market supply starts to increase. The below chart shows the year-over-year appreciation based on market supply. This suggests that as long as home supply remains this low (less than 2 months of supply), home prices will increase 10-15% over the next year.

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What can home buyers do?

Understand the potential cost of waiting

You may choose to wait to purchase a home, however the above chart suggests home prices will continue to rise as long as demand exceeds supply. According to NAR the year-over-year percent change in median existing home sale prices increased by 20.5% for the Northeast US. If this trend continues, you may find the same home priced even higher next year.

Be persistent and impartial

Expect to submit offers on multiple homes before one will be accepted. Keep saying to yourselves, “Onto the next one!”

Try to stay unemotional and unattached to any home you see - now is not the time to fall in love at first sight! Remember buying a home is likely one of your largest investments, so try to think of this as a business transaction versus a life event.

Be creative with offer terms

You may need to get creative on terms that will help your offer become the one the seller chooses. However that creativity should not be at the expense of protecting your best interests such as waiving financing contingencies and risking your deposit funds or skipping home inspections.

What can you offer beyond the highest price?

Some ideas to discuss with your real estate agent and attorney include:

Increase your down payment to potentially strengthen your offer. When comparing similar offers the one that has a higher down payment is often considered more desirable to sellers because those mortgages are considered lower risk.
Make an all cash offer. No, I'm not suggesting you rob a bank to find the money for an all-cash purchase. However you may have options to discuss with your financial advisor and lender. For example, you may be able to leverage the equity in your current home in advance or take out a securities-back loan if you have investment accounts. This could allow you to complete the home purchase as a cash transaction and convert to a mortgage after closing.
Offer the seller extra time to move or find their next home by allowing them to stay in the home after closing for days, weeks or even months.
Extend the closing date to one of the seller’s choosing as another way to give the seller more time. Any extended timeline should be discussed with your lender in regards to mortgage rate lock.
Cover some of the seller’s closing costs. For example in Massachusetts the home seller pays a “Stamp Tax ” or “Transfer Tax” to the Registry of Deeds at closing. The Stamp Tax rate is $4.56 for every $1,000 of the Gross Sales Price which means for a $500,000 home the Stamp Tax would be $2,280.
Offer to pay for services such as movers, pet sitters or babysitters for moving days, or house cleaners (for their new home).
Offer to deliver take-out for a couple of nights or rent a food truck for the seller’s housewarming party at their new home.

These are just a few of the ideas beyond Offer Price to consider. Your particular situation and financial picture will influence what you can and cannot reasonably offer.

Work with an Experienced Professional

Home buyers should choose an experienced REALTOR® and an Accredited Buyer’s Representative (ABR) to help structure an offer that is compelling to the home seller and still offers you as the home buyer the best possible protections.

Let’s talk!

If you are thinking about buying a home and feeling at all unsure, I’d love to help you explore some of the options available. Knowing where you have flexibility both financially and personally can make all the difference to structure an offer that not only meets your needs and is more likely to be accepted by a seller.

Market conditions are always changing. This is why I have earned and continue to hold my REALTOR certifications and designations of CRS, ABR & SRS. The access to resources and top REALTOR across the country provide me with the expertise to help home buyers and sellers.

And together we can move the odds ever more in your favor!

Tips for Home Buyers in this Competitive Market