October 6, 2020

Competition revs up for homebuyers

With mortgage rates persistently near all-time lows, demand has increased beyond expectation in 2020, fueling one of the hottest homebuying markets in decades.

Combined with historically low levels of inventory, it’s a recipe for a virtual tidal wave of increased competition.

Buyers sidelined by the coronavirus shutdown this spring are jockeying with those who planned to buy in the summer. And they're competing with those who previously had no plans to move: Until the pandemic stirred their desire.

Potential homebuyers have precious little time to mull choices, sometimes making offers well over asking price, waiving inspections or getting into a bidding war with other shoppers.

One recent survey showed more than 40% homebuyers who made purchases between January and May participated in at least one bidding war.

Suburban areas with more square footage and outdoor space have become more popular. Home prices in many affordable areas have moved higher as buyer demand increases.

Given an increasing lack of supply, prices - and competition - will continue to grow for at least the next few years, experts say.

Changing approaches could give you “home” advantage over the competition.

Offer a little more than asking. This can help with investors who aren't emotionally invested, but just trying to make profits.

With sellers who are emotionally involved, it's not a bad idea to try to tug at the heartstrings. A cover letter describing why you’re personally interested might help: You want to raise a family here; you love the schools, the area and so on. About 40% of successful bids include a cover letter.

See if you can tap in to the seller’s mindset. Don’t be afraid to knock on the front door. Just be respectful. A good real estate agent should be able help. Some good questions to ask include: Why are you selling? Do you need time to find another home? Do you want a quick close?

The more accommodating you are, the more interested the seller might be. Be flexible with the closing date, offer a rent back, or request minimal repairs.

Don’t let the competition sap your home shopping strength. If you’ve saved up enough for a down payment, and been pre-approved for a home loan, the hardest part is behind you. You just might have to commit to a longer search than you first thought.

Consider the market’s current appreciation rate. If you wait, you may be paying significantly more a few months down the line for the same property anyway.