January 11, 2024

Staying true to a budget in a bidding war

The lack of available homes on the market is near historic lows, sparking fierce bidding wars across the country – and prompting many buyers to get creative with their offers.

Though mortgage interest rates are improving steadily, too many buyers chasing too few properties has continued to boost home prices, making homeownership inaccessible for many Americans. The national median sale price in November was $410,200, just a few ticks below all-time highs.

As we dig deeper into 2024, it is still a home seller's market and that doesn’t look likely to change anytime soon. Some homes still receive multiple offers within the first week of listing.

Analysts expect home prices could increase further in 2024. But if mortgage rates drop faster than predicted, more homeowners could be enticed to sell, boosting sales. New home sales are predicted to continue increasing in 2024, with builders offering perks like energy efficiency and mortgage rate buydowns.

However, inventory remains tightest at the entry-level price point. Competition ranks a close second to affordability among homebuyers’ challenges. Most first-time buyers, without a home they can sell, or assets they can cash in, must stick close to budget. As a result, some are going above and beyond with creative solutions to make sure their offer stands out.Buyers eager to gain an edge are presenting various incentives to sellers, such as non-refundable deposits, reduced inspections, and waived appraisals.

Popular “bridge” strategies allow the seller a reasonable amount of time to live in the house after the close of the sale – either rent-free or at a dramatically reduced rate. This gives them time to find a home for themselves or close their own difficult deals.

It is vital for buyers not to overextend themselves financially. Working with experienced real estate agents can help with creative and strategic approaches to overcome bidding war challenges and limited inventory.

Cash is still king. One study says approximately one-third of accepted offers are made in cash, the highest share in nearly a decade.

Short of all cash, your first, best strategy for placing a competitive bid is a pre-approval letter from your trusted Bay Equity loan officer. A pre-approval letter lets sellers know you have been financially vetted. Sellers like knowing buyers are serious and can get the deal done.

Pre-approval doesn’t just ensure a better shot at competing with other buyers - it can also help you stay true to a budget.