Real estate pros are report homes fetching multiple offers to the likes of 20 or even 97 bids on listings as the homebuying frenzy continues. To win in a bidding war, buyers may be willing to waive contingencies and stretch their budgets to the absolute max.
Some buyers are offering $100,000 above asking price, Debbie Barrera, a broker at Realty Austin in Austin, Texas, told The Wall Street Journal. She even had a buyer offer $500,000 above asking price for a home with a pool.
“It’s just crazy, there’s no other word to describe it,” Barrera told the WSJ. “It’s a frenzy.”
What’s driving it? Low housing inventories. In March, the housing market had 28% fewer homes for sale than a year earlier, according to the National Association of REALTORS®. Meanwhile, historically low mortgage rates are enticing buyers to purchase a home now.
Sellers are expecting a lot more from buyers when they do list their homes for sale, too. A recent realtor.com® survey showed that 24% of homeowners expect to get more than their asking price and 29% of sellers plan to ask for more than what they think their home is worth. Further, 16% of home sellers expect a bidding war on their home and to have multiple offers to choose from; 25% expect to have an offer within a week of listing; 16% expect to receive a cash offer; 24% don’t expect to pay for any repairs or improvements to the property; and 16% of sellers expect buyers to waive contingencies, such as financing, appraisal, or home inspection.
However, waiving too much or overpaying could lead to buyer’s remorse later on.
For example, financial analysts are warning buyers to stay within their budget and not to overstretch to win in a bidding war. Most analysts recommend homeowners spend no more than between a quarter and a third of their monthly gross income on a mortgage payment or between 35% and 45% of a monthly gross income if including maintenance, taxes, and insurance. For example, Sarah Behr, a financial adviser in San Francisco, told the WSJ that buyers who earn $100,000 a year shouldn’t spend much more than about $2,340 a month on their mortgage, depending on their financial goals like paying off debts, saving for retirement, or meeting other obligations.
Source: “Buying a Home? Don’t Lose Your Head in a Crazy Market,” The Wall Street Journal (May 14, 2021) [Log-in required.]
