A lot of first-time homebuyers want to know if it’s wise for them to try and buy right now. It’s an aggressive seller’s market, and most homes are selling above list price after receiving multiple offers.
In the first quarter of 2021 in Orange County, we’ve seen an increase of 16.2% in home prices. A number of our buyers have had to make up a gap between a home’s sale price and its appraised value. They’re paying this out of pocket in order to secure the home.
Whether or not you decide to enter the market depends on whether or not you have the ability to participate in today’s market. When sellers are looking at offers, cash offers are the most desirable because there is no appraisal and they close much quicker. Cash is king, as they say.
The next best options for sellers are offers with 50% or 20% down. When buyers have this much capital, sellers know they can make up the difference between the appraised value and the agreed-upon price.
Offers with 10% or 5% down are good offers, but they’re just not as desirable in this hyper-competitive market. After that, sellers will look at FHA offers (3% to 5% down), VA offers, and finally, they’ll look at contingent offers. Contingent offers are where a buyer needs to sell a home first before they’re able to afford the home they’re making an offer on. These are the least desirable offers in this type of market.
If you’re buying real estate as a long-term investment, there probably isn’t going to be a negative effect if you end up overpaying slightly. The only way to win a home in this market is to be aggressive. Additionally, having the ability to cover any appraisal gap gives a lot of comfort to the seller.
If interest rates increase and inventory starts to climb up, then pricing may adjust and make things a little easier for all the buyers. We don’t know if that will happen for sure, though.
I hope you found today’s information helpful. If you have any questions about buying a home, selling a home, or anything else related to real estate, don’t hesitate to reach out via phone or email. I look forward to hearing from you.