More buyers are making concessions to win bidding wars amid a deepening housing shortage, record-low interest rates.
The pandemic and high unemployment rate haven’t slowed the housing market, and rather home buyers are facing heightened competition for a limited number of homes for sale. In an effort to make their offers more competitive, many have begun waiving contingencies to win the home.
In June, nearly 20% of successful offers submitted in select major U.S. markets reportedly waived the inspection contingency, compared to 13.2% during the same month in 2019. Further, 20.6% of winning offers waived the appraisal contingency, up from 17.4% a year ago.
Home buyers are waiving the contingencies to make their offers more attractive to home sellers. The inspection contingency allows the buyer to cancel a purchase or request repairs during the inspection period. The appraisal contingency allows buyers to cancel a deal or renegotiate the price if the appraisal comes back lower than the specified amount. Both an inspection and appraisal contingency are used in offers to protect home buyers in a transaction.
These stipulations are built into the Columbus Realtors standard home purchase agreement as protections for the buyer, and waiving them can put the buyer at risk. The decision to do so should be made carefully with the guidance of a trusted real estate agent, who can fully advise you on the implications of waiving these contingencies, as well as additional strategies to consider to make your offer stand out.
We are also starting to see more buyers offering appraisal gap coverage. With appraisal gap coverage, the buyer agrees to cover some portion of the deficiency should the appraisal come in below the agreed purchase price. The extent of the gap coverage varies between price points and communities.
But with bidding wars on the rise recently, buyers are trying to make their offers more competitive. More than half—53.7%–of offers faced competition in June, according to research. Mortgage rates, which fell below 3% for the first time ever this month, are driving some demand. But buyers are facing tight inventories of homes.
Today’s market remains tipped in favor of sellers as would-be spring buyers are shopping well into what would normally be summer vacation season. Home buyers, trying to take advantage of record low mortgage rates and make up for lost time, are finding limited and more expensive options. Although sellers are slowly acclimating to this unexpected surge in buyer interest, inventory is still lagging behind demand, which is driving quick time on market and listing price growth on par with this time last summer.
We recently sold a home listed at $235,000 to a buyer who triumphed over 16 other bidders by waiving the appraisal and inspection contingencies. The buyer also agreed to get their loan approved in 10 days and paid $250,000 for the home.
The $250,000 winning offer wasn’t even the highest bid, we’re received additional offers up to $262,000 but the opted to take an offer they felt offered greater certainty.
Waiving contingencies isn’t the only way buyers can make their offers stand out. About 20% of agents report that having a buyer write a personal letter to a seller has helped them win a bidding war, according to a July survey of nearly 400 agents. A similar share said that a good relationship with the listing agent came in handy, while 8% mentioned so-called rent-back agreements, in which the buyer rents the house back to the seller after closing—sometimes without charging any rent at all aka extended possession—so the seller has ample time to find their next home.
If you, or someone you know is considering Buying or Selling an Investment Property in Columbus, Ohio please give us a call and we’d be happy to assist you!
The Opland Group Specializes in Real Estate Sales, Luxury Home Sales, Short Sales in; Bexley 43209 Columbus 43201 43206 43214 43215 Delaware 43015 Downtown Dublin 43016 43017 Gahanna 43219 43230 Grandview Heights 43212 Galena 43021 Hilliard 43026 Lewis Center 43035 New Albany 43054 Pickerington 43147 Polaris Powell 43065 Upper Arlington 43220 43221 Westerville 43081 43082 Worthington 43235