While much of the U.S. economy is feeling pressure from the COVID-19 pandemic, housing markets in certain areas seem to have kept their stride over the past few months. Thanks in part to low mortgages rates, not only is real estate in these places selling almost as quickly as it was before coronavirus, but it’s also bringing in offers at or above the original asking price.
A good example would be the Twin Cities of Minneapolis and St. Paul, MN, where homes now spend a median 23 days on the market before selling, compared to 100 days back in 2010 or 2011. Also, about 90% or more of homes here have been selling at or above listing price for the past several years. Purchasers can pay more for a property but keep their monthly payments manageable with low mortgage rates, which helps home prices stay afloat in the Twin Cities.
If you’re looking to purchase a home in a hot market amid the COVID-19 pandemic, consider these tips to ensure the best possible experience.
Know There Will Be Competition
It’s becoming more common for homes on the market to receive multiple offers, especially if they’re listed in the spring, are priced between $200,000 and $400,000 and are located in higher-demand urban areas. Expect to have at least some competition when putting in an offer on a property.
The good news is that you may not have to make your best offer the first time around, as listing agents often ask for a second round if multiple buyers are interested. The second round will be for the highest and best offers to be submitted by a specific date and time.
The amount the winning bidder will pay depends on specific circumstances. If a home is priced similarly to comparable properties and is move-in ready, it might sell for 5% over the asking price (for example, $20,000 on a $300,000 property). A home that’s underpriced or in a desirable location could bring 10% or more over asking price.
Those looking to buy should avoid homes at the top of their price range in case they are required to bid higher.
Be Sure to Act Fast
It’s important to look at properties as quickly as you can when they come on the market since many clean and well-priced homes will sell in the first weekend or week once listed. Once you make an offer, make sure you’re available to accept or reject counteroffers, since the listing agent will likely not wait for you.
It’s best to choose a lender who can close within 7 to 10 days. Virtual closings are now being used by some title agents to allow parties to sign settlement documents without ever meeting.
Find an inspector before you start looking at houses so you can get a pre-inspection done quickly before making an offer. This can lead to a faster closing if the seller accepts your offer. While you won’t be able to accompany your inspector in person during the visit due to COVID-19 restrictions, many of them are now using FaceTime or Zoom, so buyers can still be part of the inspection process.
Pay Attention to Financing
Getting a strong loan pre-approval means that an underwriter has looked at the file and approved it. This way, your financing is subject only to clear title and appraisal.
Put down as much money as you can (preferably about 20%) to strengthen your offer and bump up your earnest money. Consider offering to release earnest money to the seller immediately, or within 7 to 10 days. Some buyers sometimes provide a signing bonus to the seller.
Sell Your Current Home
Selling your current home before putting in an offer on a new one will give you a better chance of winning if there are multiple offers. After selling your home, move into temporary housing, or rent your home from the people who buy yours until you close on your new property. You can also consider making the sale of your current home contingent on you finding your next estate.
Some U.S. cities are bucking the trend of seeing their housing markets affected by the pandemic. While it might seem like a risky move to buy property during these times, if it’s done with appropriate caution and efficiency, it could be well worth taking the opportunity to do so.