The national real estate market has gone through a lot of changes over the last year. It looks like there may be a return to “normal” on the horizon, but we’re not quite there yet.
Inventory has slowly been increasing, but still remained limited in April with a 52 percent decline in inventory over the past year. Meanwhile, realtor.com notes that there was a 53 percent decline in inventory in March. We’re also seeing an increase in the number of active real estate agents across the country. Couple this with the limited housing supply and there are actually more Realtors in the country than there are properties for sale, according to the Wall Street Journal.
With such an increase of real estate professionals and prospective buyers, paired with a continued lack of inventory, it would be valuable to look at some recent tactics to know what exactly a buyer and their agent are walking into. We have frequently heard about buyers entering bidding wars, having to waive inspection contingencies, and start an offer with a number already over asking just to get noticed. But in this unique market, tactics have had to get more creative, too.
- Buyers are starting to waive appraisal contingencies
It’s not just inspection contingencies being waived anymore, some buyers are having to waive appraisal contingencies as well. This is the direct result of a market that is saturated with numerous buyers offering tens of thousands over the asking price. Buyers are coming up with new ways to be considered a serious offer. Without waiving the appraisal contingency, an offer that’s over asking (and likely well over what a property would appraise for) comes across as highly likely to fall through when it becomes more apparent just how much a buyer is going to have to pay up-front.
- They’re also waiving the financing contingency
Some buyers are waiving all of their contingencies, which means financing too. A risky move for those still waiting on their financing approval, if it doesn’t go through then they lose their deposit. There is added danger if the offer is significantly over what the home would appraise for because the lender may feel the need to deny financing. If your buyer is considering waiving all contingencies, then getting pre-approved and staying aware of comparables would be a wise idea.
- Have you heard about the kick-out clause?
Something both sellers and buyers have been adding is the kick-out clause which allows the sellers to continue marketing their home even after they’ve accepted an offer so they may accept a better one if it comes along. In today’s seller’s market, buyers are doing everything they can to make their offers more appealing and some are even considering adding this clause, as well. Under other circumstances this could benefit a buyer too if they have to sell their home before purchasing a new one, it gives them an out if they’re struggling. In today’s market conditions though, it’s definitely leaning in favor of the seller and used as a way to make a potentially already-over-asking offer, even more enticing.
- Introducing: the walk-and-talk
According to a recent Banker and Tradesman article, a walk-and-talk actually helps the buyer. Before an offer is made, during a walkthrough, some potential buyers are bringing along inspectors for a quick examination. No photos, no written inspection details, the buyer has to take all the notes, but they do get some questions answered before they make that no inspection contingency offer. It’s not necessarily something inspectors are willing to jump at though, as there are some potential issues with gaining permission from the owners, what the inspector’s insurance will cover, and false expectations on behalf of the prospective buyer.
There are other strategies, of course, and you should always encourage your buyer to only do what they are comfortable with. In today’s market, it’s easy to get carried away and even easier to lose money. Every real estate professional should consider using platforms like the Custom Stats Module, or (for those in New England) Real Estate Records Search. They can support your position and provide more data to make a better-informed offer.