The U.S. economy is struggling to come back from the coronavirus. One area that’s proved surprisingly strong: Housing.
Pushed by low mortgage rates, real estate in many cities is selling nearly as briskly as it was before Covid-19 changed the social landscape. Homes are selling quickly and for sums that are often at or over the asking prices.
The Twin Cities of Minneapolis and St. Paul are just one example. The market there is crackling, says Jim Dropps, a realtor at Northeast Real Estate Group in Minneapolis. “Homes spent a median 100 days on the market before selling in 2010 or 2011; now it’s 23 days,” he said last week.
What’s more, Dropps says, the percentage of homes that sell at or above list price has been at 90 percent or more for the past several years. Low mortgage rates, which let purchasers pay more for a home and still keep their monthly payments manageable, have helped make those prices possible.
If you’re hoping to buy a home in a hot real estate market, here’s what you need to know:
“I tell buyers that the vast majority of homes that are clean and priced well will sell in the first weekend or week on the market,” Dropps says. Just as before Covid-related shutdowns began, you should look at properties as quickly as you can when they come on the market.
If and when you make an offer, stay available to accept or reject counteroffers. “The listing agent isn’t going to wait for you,” says Lynn Sanborn, managing broker at Windemere Real Estate Yarrow Bay in Kirkland, Wash.
Choose a lender who can do a very quick closing — within seven to 10 days. Some title agents are using eClosings, which allow parties to sign settlement documents without ever meeting. Because of online notarization laws, however, virtual closings aren’t legal in every state.
A pre-inspection, which takes place before you make an offer, can help clear the way to a fast closing if the buyer accepts your offer. “Find your inspector before you start looking at houses,” Sanborn says. Before the pandemic, buyers often accompanied inspectors during the home inspection. Now, some inspectors are using Facetime or Zoom to let purchasers tag along remotely from a safe distance.
To buy a home, you may need to make an offer on more than one property, and yours may be just one of multiple offers. Multiple offers are increasingly the norm, especially in the spring market, Dropps says. They’re more prevalent in homes priced between $200,000 and $400,000 and in higher demand urban areas, he says, than in homes that are more expensive or in the suburbs.
You may not have to make your best offer the first time. “You don’t know if there will be multiples or how many. Properties hit the market and you rush to get an offer in. If there are multiple offers, the listing agent will often do a second round, asking for ‘highest and best’ offers to be in by a particular date and time,” Dropps continues.
Specific circumstances determine how much more the winning bidder might pay. A home that’s priced in line with comparable properties and is move-ready might sell for 5% over the asking price. That means $20,000 on a $300,000 property. An underpriced home or one in a very desirable location might bring a premium of 10% or more.
Because you might need to bid higher, don’t look at homes at the top of your price range. “Know your maximum price and look at properties listed for less than that,” Sanborn says. “You need room to make a higher offer if that’s required.”
Sell your own house first
You have a much better chance of winning in a multiple buyer situation if you don’t have your own house to sell. Sell your home, then move into temporary housing or rent your home back from the buyers until you close on a new property, if you can. You might also make your own home’s sale continent on you finding the property of your choice. “You can likely still get full price with that contingency,” Dropps says.
Get your loan fully pre-approved
Have a strong loan pre-approval, meaning that an underwriter has looked at the file and given it a green light. With a “pre-underwritten” loan, Sanborn says, “your financing is subject only to clear title and an appraisal. It’s been through underwriting and you’re ready to go.”
Put 20% down and bump up your earnest money
The more money you put down, the stronger your offer will appear. The same is true of earnest money. “You might offer to release earnest money to the seller immediately, or within seven to ten days,” Sanborn says. “I’ve even seen buyers offer a signing bonus to the seller.”