We all know that this is the hottest real estate market ever. Period. No other time in the history of the universe has it been this hot.
We also know that mortgage rates are going up, and both homeowners and investors want to buy a home before the rates go any higher.
The economic law of supply and demand states that when demand is high, prices will rise. Well, demand isn’t going anywhere anytime soon, and supply isn’t changing either.
So, the question buzzing in our minds: what should homebuyers do?
Start thinking about purchasing the “leftover properties”
For context, I’m an agent in Colorado with multiple active clients. In our market, much like the rest of the United States, homes are listed on Wednesday or Thursday, showings occur throughout the weekend, and offers are due on Sunday evening for a response on Monday.
By Tuesday afternoon, the MLS is a ghost town, with tumbleweeds blowing across the screen, waiting for Thursday to start the circus again.
But not always. On some days, there are still properties leftover.
Granted, most of these properties are still on the market for a reason. Many are situated on undesirable busy streets or even an active train track!
If location isn’t the problem, there usually is an easily identifiable issue with the house.
For example, a beautiful house is listed in my market for a laughably low price. So low that you would assume the listing agent’s finger must have slipped when entering the price.
But, as it turns out, they didn’t. When you enter the home, there are cracks everywhere. Even worse, there are horizontal cracks, and that’s a terrible sign.
I’m not talking about these types of leftover listings.
Let’s look at another property.
About 15 minutes north of my town, there’s a listing that has been on the market for 44 days. It’s beautiful on the outside, and it used to be beautiful on the inside. It has 10-foot ceilings in nearly every room, including a 20-foot ceiling in the entryway, a sweeping circular staircase, a nice kitchen, and plenty of storage.
But, now that the carpet and paint is 20 years old and some of the floors are damaged from water leaks, the home clearly needs some help.
Yet, even with all of the potential, the property sits for 44 days.
The good news is that this leftover property was patiently waiting for the right buyer. That buyer happened to be a client of mine. After an initial listing price of $725,000, we were able to offer $670,000. The best part? The appraisal came out to $900,000!
We did all of this without a bidding war and giving up important leverage on the buyer’s side of the table.
How to find leftover properties
Listing agents are human, and humans make mistakes. I’ve seen some real doozies, including a house listed with zero bathrooms on the MLS. Legally, a house must have a bathroom, and this particular house had two.
While it doesn’t sound like a big deal, you wouldn’t see this listing if you were set up to receive listings with a minimum of one bathroom. Mistakes mean there’s a smaller number of buyers viewing a listing.
So, this is what you should be looking for — the unseen properties due to a listing entry error.
But listing mistakes aren’t limited to entry errors. Some listings feature photos from a completely different house. That means there are a lot of unsuspecting buyers walking into homes confused and walking out without making an offer.
This happens all of the time with multifamily properties listed as single-family homes or houses listed as condos.
When your agent sets you up to receive listings from the MLS, they set up parameters, so you don’t get swamped with listings you’re not interested in. You don’t need to see those listings pop up if you’re not buying a farm or vacant land. Ditto single-family homes if you only want a condo.
But real estate agents can only send listings that are categorized correctly, and when an agent makes a mistake, it can have huge repercussions.
Side note: If you’re selling a property, make sure your agent sends you the listing and that you read it thoroughly to make sure all the information is correct. The agent can update the listing, but only if they know there is a mistake.
If your agent enters fewer parameters into the MLS when setting you up for a search, you’ll receive far more listings, which can be daunting in a robust market (lucky for you, there is a historic supply shortage right now).
But the more listings you get, the more possible mistakes you’ll find and more opportunities you’ll discover.
Is this groundbreaking advice? No. I know that. But in this market, getting into a bidding war and fighting over limited supply with other buyers is exhausting. Do whatever you can to take that out of the equation by looking at houses they aren’t looking at.
Waiving inspections and appraisals
Another fun aspect of the current market’s home buying process is waiving inspection and appraisal gap coverage. Right now, at least in my market, when you are writing an offer, to be competitive, you’ll need to waive your ability to request inspection repairs and, in most cases, cover any gap between appraisal and offer price.
You have to offer this because competing buyers include this in their offer. If your offer doesn’t also include this, you’ll go to the bottom of the pile.
You don’t have to offer these seller-friendly clauses when your offer is the only thing in the pile. It means you can have a home inspection — and if something pops up, you can choose to request a repair, a concession, or accept it as-is. Remember, any request is just that, a request. The seller can still say no, but if you waive the inspection to get your offer accepted, you can’t even make the request.
Appraisal gap coverage is another sticky clause being added to offers right now. Appraisal gap coverage means you will pay the amount you offered, regardless of the appraisal.
If the appraisal comes in low, you’re bringing additional money to closing to cover the gap between what you offered and what it appraised for.
And while you don’t have to cover the gap entirely, you can offer to cover the gap only up to a specific dollar amount instead of the full amount; there are other buyers out there who are offering to cover the whole gap. Just think back to the property from before. Some buyers would have covered upwards of $200,000 in the appraisal gap.
Again, your offer goes to the bottom of the pile.
Skip the bidding wars and the lines at open houses. take your time looking at a property and get an inspection by looking at the “leftovers”.