In the history of the United States – ever since they started tracking the number of homes for sale in our country – housing inventory has never been as low as it is right now.
This is simply a factor of huge demand for housing brought on by a sociological shift due to COVID-19. People are realizing they need to have more space for home offices or home schooling, or are simply ready to for a change in their living space after being cooped up for the last year.
This surge in demand is coming on the heels of a 10-year period, from 2010 through 2020, where we saw the number of new homes being built in the United States at only half of what it was previously.
When a decrease in supply and an increase in demand occur, two things will happen: increased competition for housing and skyrocketing home prices.
In most counties in Utah, which is where our offices are located, we’ve seen double-digit annual appreciation rates at around 10%. Nationally, annual home appreciation is fluctuating between 6% and 7%. And thanks to low inventory and strong demand, it is very unlikely this trajectory will switch course any time soon.
If you are ready to enter the housing market and find a new home that fits your family and your lifestyle today, there are three tips we can offer to give you a leg up. These are things that will help you beat the competition if you go into a multiple-offer situation, which according to the National Association of Realtors is happening on 64% of homes being sold today.
#1. Get a Solid Pre-Approval Letter
In a market like this, you want to be better approved for your financing than anybody else. A pre-approval letter that you get in five minutes off a mobile app is not enough to get you to the closing table fast. You want to go through what’s called a credit and income underwrite. That’s where we gather all of your information, your assets, your income – anything that has an impact on your credit – and we put it in front of an actual underwriter who reviews and stamps it for approval. You now have the blessing of approval from an underwriter, and now once you get your house under contract all that’s left to be done is the appraisal, the title work, and the disclosures. These things can be done very quickly.
#2. Offer a Faster Closing to the Seller
Currently, the average time it takes to close a mortgage loan in the United States is 58 days. That’s ridiculously slow. To be competitive in this market, you want to be able to close in a matter of weeks. If you can’t close in two to three weeks, you’re going to get beat by t he other offers that are able to meet the seller’s required deadlines.
#3. Waive the Financing and Appraisal Contingencies
OK, take a breather. This does NOT mean you will lose your earnest money and be unprotected. There are ways that you can accomplish both. Depending on what state you are buying in, most purchase agreements will have what’s called an inspection contingency or a due diligence contingency. This gives you the right to have the home inspected within a specified number of days before closing. This contingency clause protects you as the buyer, allowing you to cancel the contract or negotiate repairs based on the findings of a professional home inspector.
It’s typical that many offers will see a 10-day due diligence followed by a financing and appraisal contingency. So our suggestion to home buyers today is to waive the financing and appraisal contingencies. Let’s get you pre-underwritten and approved so that is out of the way. Then we can get your appraisal ordered on a rush the day that your offer’s accepted so we’ll have it back within 10 days. So you’ll have your appraisal, we’ll already have you underwriting approved, and by the time your physical inspection contingency expires, we’ll have accomplished those other two things. Being on top of all of these things will scream to the seller that you are committed to buying the property.
We know financing a home in today’s market can be scary, confusing, and hard. However, if you employ these three tactics we are confident you will see huge wins in multiple-offer scenarios. There is no need for you to be intimidated by the competition in the housing market!
If you would like to get pre-approved for a home loan or have questions about how the process works, fill out the consultation form below to speak with one of our mortgage advisors. We look forward to helping you WIN!