Northern Utah’s housing market is hotter than ever. Prices are rising as demand far outpaces the supply of homes.
For example, prices in Weber, Davis and Morgan counties increased 20%, 18% and 42% respectively in February compared to a year ago. Meanwhile, available inventory fell 64%, 58% and 74% in those same counties.
With a dwindling supply of homes and lots of would-be buyers, you may be feeling discouraged and possibly a little desperate in your house hunt. As these feelings arise, it’s more important than ever to be patient and prepared. You’ll also want to minimize your risk should you decide to make an aggressive offer.
Below are just a few of the mistakes to avoid in today’s low-inventory market:
Not preparedTo have a shot in this extreme seller’s market, you need to have your financing pre-approved and work with a reliable lender who will help you meet your deadlines.
You must also understand the market conditions in your area. Talk to your Realtor about how fast homes are going under contract, how quickly you need to make an offer and what percentage of asking price is competitive in your preferred neighborhoods.
Skipping inspectionsIn some cases, the market is so hot that buyers are enticing sellers by waiving the due diligence condition found in the standard Utah Real Estate Purchase Contract.
You should be very careful when using this strategy. Buying a home will likely be one of your largest financial purchases. Thus, it’s important that you have a good understanding of the house and its condition before purchasing it. You don’t want to buy the home and later find out there are significant repairs or problems you didn’t know about.
Even if you decide to waive your right to get your earnest money back, make sure your contract still allows you to inspect the home and cancel based on what you find.
Additionally, if you decide to allow the seller to keep your earnest money before you’ve inspected the house, it’s a good idea to visit the property in person and review the seller disclosures before making an offer.
Waiving the appraisalAlong with offering to skip inspections, some buyers are increasing their offer’s appeal by waiving the appraisal contingency. When in place, this contingency allows you to have an appraisal, cancel the contract if the appraisal is lower than the purchase price, and keep your earnest money.
When the contingency is not in place, the buyer is in danger of overpaying.
One way to reduce the risk of this strategy and still appeal to the seller is to waive your right to get your earnest money back based on the appraisal results but still preserve your right to conduct an appraisal and cancel the contract if the appraisal comes in too low.
Being sloppy with appraisal languageIn rapidly rising markets where a home is unlikely to appraise for the contract’s purchase price, some buyers offer to pay cash to make up the difference. That’s because a bank won’t lend more than the appraised value.
Problems arise when buyers use unclear language in their offers and don’t specify the lowest appraisal amount that is acceptable.
Work with a Realtor to make sure your offer clearly specifies the lowest appraised value you’re willing to accept, the amount you’re willing to pay in cash above that appraisal floor and your right to cancel if the appraised value is lower than that amount.
Additionally, if you decide to pay cash to make up the difference between the appraised value and the purchase price, make sure you understand you may be paying more for the home than it’s worth.
These are just a few of the pitfalls you’ll want to avoid when making offers in this fast-paced real estate market. Contact a local Realtor for guidance navigating these unprecedented conditions. Find a directory of Northern Wasatch Realtors at NWAOR.com.