Relocating employees don’t need any more stress in their lives, but today’s competitive real estate market is dialing up the pressure. The good news: more employees will be able to sell their homes quickly, at or above their asking price. The bad news: they’ll likely face a competitive home buying process at the destination.
In most parts of the US, demand for homes is far greater than the supply. According to the National Association of Realtors (NAR) February REALTORS® Confidence Index Report, there were four offers per home sold (closed) in February, compared to two or three buyers per home sold one year ago.
The competition is fueling double-digit price growth and short marketing times. NAR reports that 74% of existing homes sold in February 2021 were on the market for less than 30 days. They add that a healthy supply level of six months’ demand would require 27 more million homes to be on the market.
Having to buy a home quickly, with a limited selection and even more limited negotiating power, is far from ideal, but that’s the situation in which many relocating employees will find themselves. Here are a few homefinding strategies when moving employees to another location during a competitive market.
Prepare for the Homefinding Trip
Thorough preparation for the homefinding trip is even more critical than usual. Relocating employees should have a solid idea of their budget, target neighborhoods, home size and style, and other essential considerations. They should have their mortgage pre-approval and proof of funds in hand.
Leverage Real Estate Technology
In today’s Covid world, the real estate industry has fully embraced technology to get deals done. Some real estate experts predict that virtual property tours could become the new normal in the home buying process because they create a 24/7 open house. Using ever-more-sophisticated virtual tours, buyers can preview multiple properties from anywhere, at any time. This technology can help buyers, and in this case, moving employees to another location, to quickly narrow and focus the list for in-person tours.
Don’t Hold Out for the Home of Your Dreams
It’s a truism that no matter how big the budget, there’s no such thing as a perfect home. Maybe the exterior color is unusual, or the kitchen is stuck in the 1980s. In a competitive market, buyers might have to be a little more flexible than usual. Consider whether an objection is a deal-breaker or a fixable cosmetic issue.
When You See a Home You Like, Act Fast
A home is a significant investment, and the employees moving to a different location should have some time to shop around and consider their options. But in a hot market, that strategy could result in an endless, frustrating homefinding process and temporary housing limbo. By the time an employee decides she liked the Tudor house she saw a couple of weeks ago, it’ll be gone. It’s not unusual for homes to go under contract before a scheduled open house occurs or for an open house to result in a stack of offers. Buyers should be prepared to write an offer on the spot.
Approach The Offer Price Strategically
Relocating employees will know their pre-approved mortgage amount, but only they can decide how much they want to spend. In many cases, homes are selling for more than asking price. Buyers might want to look at homes priced somewhat below their maximum budget to give them more flexibility with their offer. The days of lowball offers and multiple rounds of negotiations are over, so buyers should make their best offer first. That said, if the contract price is significantly more than the asking price, the mortgage appraisal might come in below the contract price.
Make a Clean Offer
The more contingencies in an offer, the more risks to the seller that the sale will fall through. In a multiple bid situation, all-cash offers with no or few contingencies jump to the top of most sellers’ lists. This strategy is not realistic for most relocating employees, but buyers should consider other ways to make their offer more enticing. Maybe it’s shortening the timeline for inspections or offering earnest money beyond the minimum required. Think twice about asking for the patio furniture, the sound system, or other concessions.
Appeal to the Seller’s Hot Buttons
Sellers will generally view higher and cleaner offers more favorably, but when they have the luxury of multiple offers, they’ll consider other aspects of the offer, too. Buyers should be as flexible as they can around the seller’s timing and other needs. They might also consider writing a warm, personal note telling the seller how much they love the home and how they can see their family living there. This tactic can be especially effective with longtime homeowners who are very attached to their homes. The buyer might plan on gutting the kitchen ASAP—but that can be his or her secret.
Don’t Be Discouraged by Rejected Offers
Multiple offers for sellers mean many rejected offers for buyers. In many cases, buyers believe they have negotiating power and disregard their agent’s advice. Buyers shouldn’t be discouraged but learn from this experience and be prepared when the next promising home comes along.
Remember that Renting Can Be a Fallback Option
In some high-cost areas, renting can be significantly cheaper than buying, particularly in a sellers’ market. For prospective buyers who feel they’d be stretching their budget to acquire a so-so property, renting can be worth considering. Renting can be even more appealing if it gets the relocating employee into a high-quality school district in an otherwise unaffordable neighborhood. The prospective buyer can save or invest the departure home proceeds and re-enter the market at another time.