Statistically, it is pretty much a seller's market across the country.
Generally, if an area has less than six months' inventory on the market, it's a seller's market.
In our Northern Virginia market, we're looking at 2 - 2.5 months of inventory. And in certain neighborhoods in certain areas, there is far less. In fact, in certain pockets in certain price points, you can expect multiple offers, escalation clauses and offers waiving home inspection and appraisal contingencies.
In Alexandria, VA in June 2018, we averaged 1.9 months of housing supply, down from the five year average of 2.5 months.
Even if you are lucky enough to get a property under contract, you will find that sellers usually know they are holding the upper hand and they'll hold firm on not making home inspection repairs. At least, they won't put up with being nickled and dimed, although a major repair will typically get their attention as they know it is going to continue coming up as an issue.
Now, of course, not every house is going to be priced properly from the beginning, nor is every house going to be the condition or location to appeal to the widest pool of buyers, so even in a seller's market, there is the opportunity to negotiate.
So, what's a well qualified, serious buyer to do in this type of market?
First of all, understand the environment in which you are competing. For example, take the very popular zip code 22301, which encompasses the Rosemont/Del Ray area, which presently has 1.3 months of inventory. Clearly, you'll be facing plenty of competition there.
In all likelihood, if you are writing an offer on a property in this particular area of Alexandria or any of the surrounding neighborhoods, to be honest, you will be facing competition and that means:
- Escalation clausses
- Offers with no contingencies for appraisal or home inspection
I'll be honest, it's not always easy. I had a client lose out on the perfect house just a couple of weeks ago because even though she had a picture perfect offer - escalation clause, solid approval letter, significant down payment, with a home inspection for informational purposes only - and even though the listing agent said we would have beat out 5 other offers, at the end of the day, we could not give up the appraisal contingency so the sellers took an offer without an appraisal contingency. The sales price was a few thousand dollars lower than what we offered, but the sellers felt "bird in hand" was the safer option than risking an offer where the property may not appraise.
That's not to say that the average mortal cannot buy a house in Alexandria without throwing caution to the wind and giving up all protections buyers normally have. No, not all...while it may not be possible to buy just ANY house on the market, no matter how sound your financing or how good your offer, there IS a house out there for you and with enough perseverence and realism, you will prevail.
It is critical, though, that you are prepared:
- Strong preapproval letter from your lender; and we're not talking internet pre-qual, we are talking a preapproval letter from a local lender who has verified credit, income, assets, and looked at documentation. And he needs to not hesitate at getting on the phone and pitching your offer to the listing agent - often that extra vote of assurance can make all the difference. Be sure your lender is YOUR advocate. They are not all created equally.
- Think about what terms you are comfortable offering: can you live with a home inspection only for informational purposes? You can still void the contract, just not ask for any repairs.
- If you have a substantial down payment and the house doesn't appraise for the sales amount, would you be willing to come to the table with the difference? If so, you can waive the appraisal contingency.
- Post settlement occupancy for the sellers? Normally we never advise on doing these, but sometimes desperate times call for desperate measures. It's just one more thing to consider putting in your arsenal.
- Escalation clause. There is some controversy about escalation clauses because if not used properly, they can backfire. Some clients think they are a license to make a low offer initially, escalating if another offer comes in. And some sellers take offense at that because it's like waving a flag that says "I don't want to pay you what you want for your house, but if I am forced to, I can go higher." In other cases, they are the norm, but they really need to start at least at list price or above. If you know you're facing competition, why risk offending the seller; put your best foot forward and then add something to sweeten the offer.
- Think about the houses that have lingered a little longer on the market. Sure, you would prefer something move in ready and with all the latest updates, but could you make something else work?
Sure, it's tough out there some days and a strong, robust seller's market can wear you out. We get it. It can be emotionally taxing and more than once, you'll be tempted to just give up the search. But, no worries, you will eventually prevail and move into the house you always wanted.
It may take a little longer than you expect and may be tougher than you want, but it can be done.
You just gotta have faith and a little patience.