The state of the current housing market is moving at a frenzied pace. Homes are going pending instantaneously with upwards of 20 or more offers, and the fear of missing out is forcing buyers to make rash decisions. It’s become routine to hear about all contingencies being waived, homebuyers accepting homes “as is” and sales prices going sky high over the asking price.
With memories of the 2008 recession still in buyers’ minds, how can homeowners be assured that their home purchase will be a wise investment? Currently the perfect storm of low mortgage interest rates, high demand and low inventory is the reason Bend’s median home sales price jumped to $580,000 during January. There really isn’t a “good deal” anywhere in sight, but there are ways to limit the risk and even make a smart buy in today’s market. Buyers need to make quick decisions. Strategizing and understanding limits and goals will help these decisions not be hasty ones.
Every buyer must have financing in order and a pre-approval in hand. Once a price range is determined, ask the lender for monthly payment and closing cost estimates at various price points. Assess where the comfortable payment will be and afforded, easily. Consider buying a home that needs sweat equity and complete updates and upgrades that will in turn help provide more equity—which could help keep the home’s value in the black if prices do dip. Whether or not there is another recession, the home will be more valuable and will have been more affordable than buying one already fixed up or new.
Avoid unnecessary risks by being mentally prepared and having a game plan about how far you’re willing to go, both in price and risk, before you make an offer. In this ultra-competitive market we advise that our buyers know their “walk-away” price: the price you’re willing to walk away from the home and lose out on the home to another buyer; their highest and best offer. Buyers are waiving inspection, appraisal contingencies and even buying homes sight unseen.
This is not only risky, it’s straight up unwise. Waiving a professional home inspection is a gamble that could end up costing a buyer tens of thousands of dollars with issues that would have been revealed during an inspection. Waiving the appraisal contingency could mean that the buyer would have to make up the appraisal gap, the difference between the home offer price and the appraised value.
Real estate prices historically continue a climb upward over time. Even if there is a short-term downward trend, sale prices have already exceeded the 2007 high prices before the crash. Building wealth is a long-term objective and it’s important to not rush into an imprudent purchase, being influenced by the mob mentality and ultimately living with buyer’s remorse. Successfully buying a home and maintaining it for years will create wealth, which in turn can be used as a tool to accelerate one forward, and can be handed down for generations.