(NEW JERSEY)– The lack of available homes on the market is near historic lows, sparking fierce bidding wars in cities across the country – and prompting many buyers to get creative with their offers.
In June, 1.08 million homes were for sale nationwide, according to the National Association of Realtors (NAR), down 13.6% from a year ago, when 1.22 million homes were available.
“It’s still a seller’s market, and we won’t see that change anytime soon,” Sarah Drennan, a realtor with Terrie O’Connor Realtors, in northern New Jersey, tells ABC News. “Some of our homes are selling with anywhere from 10 to 50 offers, and within the first week the home is going under contract.”
Housing experts say the biggest challenge for home buyers right now is competition, and cash is still king. One-third of U.S. homebuyers are paying in cash, the highest share in nearly a decade, according to real estate broker Redfin.
Too many buyers chasing too few properties is pushing home prices out of reach for a growing number of Americans. Data compiled by the NAR found roughly one third of homes sold in June sold for above the list price, when the national median sale price was $410,200, the second-highest number on record and 0.9% less than the all-time high from one year ago of $413,800.
Undeterred by the highest mortgage rates in more than a decade, some buyers are finding creative ways to win a home and outmaneuver the competition.
Dylan and Shannon McCarty describe their home search in Ramsey, New Jersey as “brutal.” When their rent in Hoboken, New Jersey went up again in January, the couple decided it was time to stop renting and start building equity in their first home. Yet despite being pre-approved for a mortgage, the McCartys were outbid for five different homes over five months.
For their sixth time, they decided to employ a different tactic and appeal to the sellers’ human side. Shannon McCarty’s best friend happened to know the neighbors of the home they wanted to buy. On the day of the open house, those neighbors walked through the home with the McCartys to give off the “good family vibe” they knew the sellers were interested in.
It also didn’t hurt that the couple bid $50,000 above the asking price, but in this competitive market, they knew even that might not be enough. The McCartys believe what made the difference was writing a “love letter” to the seller.
“We showed them our desire and eagerness to get into the home. We described how we loved the charm of the house and how we would be thrilled if they would select us to move into their home and start our family,” Dylan McCarty says. “There were multiple offers, including some that were all cash, but we were told by our agent that the sellers went with an emotional decision, and they went with us.”
If your persuasive letter-writing skills aren’t quite up to snuff, there are other ways to sweeten your offer. Motivated buyers looking for an advantage are throwing all sorts of extras at sellers, like agreeing to non-refundable deposits. “It shows that you have skin in the game and that you are going to move forward because you don’t want to lose that deposit,” Drennan says.
Additionally, some buyers are limiting their inspections to only structural or environmental issues, or scrapping inspections altogether. Depending on the market, buyers are also waiving home appraisals or agreeing to pay the difference and ‘bridge the gap’ in the event a home is appraised for less than the asking price. Yet another popular strategy is allowing the seller to live in the house rent-free or at a dramatically reduced rate after the closing, to give them time to buy a home for themselves.
The lack of inventory has been made worse by homeowners who are reluctant to sell and part with their low mortgage rates.
With their first baby on the way, Sarah and Ryan Locurto would like a larger home in Ridgewood, New Jersey, but their 2.5% mortgage rate is less than half the current national average, which as of early August is closing is on 7% for a 30-year fixed-rate.
“If we did find something that we loved and we felt like we weren’t overpaying, we would move but, you know, the mortgage rates are a big factor,” Sarah Locurto tells ABC News.
Instead of giving up their low mortgage rate, Drennan says some buyers are pouring the money they would have spent on buying another home into renovations on their current house.
“We’re seeking sellers willing to divorce their current rates,” Drennan says. “You marry your house, but you date your mortgage. You can always refinance for a more attractive rate, which many lenders are doing now, fee-free.”
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