We have been seeing a declining number of available homes for sale for several years now but in January of this year those numbers sunk to the lowest levels in history. Comparing the number of available homes this year vs last year at this time there is an over 50% decrease.
This is very troublesome as we head full on into the traditional Spring and Summer selling seasons. This severe lack of inventory has created a panic like frenzy amongst would be buyers to secure new listing as they hit the market.
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This frenzy has created multiple offer bidding wars on most new listings as they hit the market. This has also led buyers to extreme measures when placing their bids. "They say that desperate times require desperate measures", well those measures now include offers considerably over full price, waiving appraisal contingencies and for some waiving the home inspection. We are even seeing some very creative perks being offered to sellers like paying some or all of their closing costs.
These concessions may seem like a good idea during the heat of the battle but are they truly in your best interests long term? Let's take price, is it a good idea to exceed a homes list price by an extreme amount? When we say extreme, we mean by 10% or more of the listing price. Some things you may want to consider before going all in. Is this a home or the home? How long do you plan to stay there? Will I need to put a lot of extra money into the home after closing and the ultimate question. What if we need to sell in the next 2-3 years? Will we be able to get out what we have in?
Your next consideration is contingencies. Are you willing to bring extra cash to closing or better yet, do you have the extra cash to even be able to waive this contingency? How about the home inspection? Is this something that you should really be waiving? Many homes can look really good on the surface but have underlying conditions that only a trained professional can spot. This is a big Caveat Emptor "Let the Buyer Beware"
If you are on the hunt for a home this Spring, you may want to condsider a few things when getting into a bidding war. Is this home worth going all in? Do we truly have the finances to back up the bid we are placing? Do we have the expertise to handle any potential issues if we pass on an inspection? Lastly, make sure you have an experienced agent who knows the pitfalls and is putting your best interests first and not just trying to win a bidding to get paid.