How hard is it to buy a home right now? “Beyond crazy and frustrating.”

The pandemic-era real estate market has proven a godsend for sellers and a headache for buyers. A shortage of homes for sale continues to drive double-digit prices across the country – forcing home hunters to go to extremes to win bids.

Take a house near the Microsoft campus outside of Seattle that was listed for about $ 725,000. The buyers bid without seeing the home, bid $ 400,000 above the asking price, and foregone all contingencies – meaning no inspection or mortgage financing risks were required, recalled Ryan Dibble, chief operating officer of Flyhomes who represented the seller in the transaction.

“Even we thought a little, ‘Wow, that’s aggressive,'” recalled Dibble.

According to brokers and buyers, it is increasingly not enough to offer a price above the asking price to win an offer on the ultra-tense pandemic housing market. In fact, exceeding the asking price is only the first step in winning an offer, with buyers increasingly offering additional incentives, including not inspecting hidden structural problems and providing free leasebacks for sellers or offers for sellers in between to stay in the houses for one to six months after they close – rent-free.

This has some market watchers worried that property prices may get overheated as they remember the 2006 property bubble that ended in an ugly burst. At the end of 2020, home prices were about 15% higher than a year before the pandemic crippled the US economy. according to to the national association of brokers.

The pandemic real estate market is “more than crazy and frustrating for buyers,” said George Ratiu, chief economist at Realtor.com. “I wouldn’t call it a normal market.”


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Ratiu, who said he believes the market is overheating but has not yet turned into a bubble, said several trends are conspiring to turn the tide on buyers. Nearly 5 million millennials turn 30 each year and are entering the decade of their lives if they want to settle down and own their home, he noted. And historically low mortgage rates help make home buying more affordable for first-time buyers.

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The pandemic also caused people to look for new homes, especially properties with home offices and outdoor areas, given the restrictions and homework trends of the past year. And while existing homeowners can get staggering rewards for their properties, some are hesitant to sell because they worry about their ability to find housing in the face of rising prices and widespread shortages of inventory.

“With the new price adjustment, you have to ask yourself, ‘Can I replace this house elsewhere?’ and second, ‘Am I going to be out of my own house, my own neighborhood?’ “said Daniel de la Vega, President of ONE Sotheby’s International Realty in Florida:” I spoke to an ex-NBA player. He said, ‘It is I don’t care if they offer me $ 20 million for my house, I’m not selling ‘and his house is now worth $ 5 million. “

The result is that homes for sale are getting more bids than they did before the pandemic, with data from Flyhomes showing sellers now getting an average of 11 bids, compared to about 5 pre-crisis bids.

“I definitely felt discouraged”

That gives buyers a headache. Matthew Karlsson, who started looking for a home with his fiancée in the Boston area earlier this year, estimates they looked at about 100 homes and spent much of their free time browsing listings, going to exhibitions, and making deals .

“You see six to seven houses a day and after a while they merge,” he said. “I definitely felt discouraged.”

Karlsson said they were “maybe a little naive” at the beginning of the process. “We made a few offers here and there,” none of which were successful, he explained. “Our buyer agent had feedback channels with the seller agent, it mattered not only that we hadn’t listed enough above, but also [winning bidders] waved all possible contingencies to win the house. “

Some open houses were closed before they could see the house, such as one that closed its exhibit early after 150 people came to see it, he recalled.


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In the end, one of their offers was accepted in mid-April and they are preparing to move in later this month. To win the bid, they offered $ 90,000 above the call and agreed on a price of just over $ 700,000. They also waived the normal control option. Even so, Karlsson said they did a more informal tour inspection that helped them find out if the house had any major flaws.

“A regular inspection is really very thorough,” he said. “It assumes you are renegotiating the price and that’s not realistic in this market. It’s such a strong sellers market that you can’t renegotiate the price” because the sellers can simply pick another buyer who is willing to forego the inspection, he notes.

According to a survey by Realtor.com earlier this year, around 1 in 5 first-time home buyers had to go over budget to buy a home, and more than 1 in 10 passed out contingencies. Another fifth spent more than a year looking for a property, the survey found.

“It shows that this has been a very difficult and arduous process for new buyers,” said Ratiu of Realtor.com.

All cash offers

About 15% of first-time buyers made cash offers, which is more than in a typical year, Ratiu said. He estimated that in a typical year, less than 10% of first-time visitors are cashless.

In competitive markets, some buyers are offering cash and financing the home after it closes, said Ruthie Assouline, a New York and Miami real estate agent who focuses on real estate listings for $ 2 million or more. High-end buyers are filled with money thanks to record high stock prices and a strong recovery in the working class, who are less likely than working-class workers to lose their jobs during the pandemic.


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“For the past few years, on all of our offers, I’ve got emails from agents saying, ‘How negotiable is this seller?’” She recalls. “Now every email starts with the question ‘Is this still available?'”

Some companies help buyers make cash offers, such as Flyhomes, which raises the money for a buyer to make the offer. Essentially, Flyhomes is buying the property with cash, and then the buyer is funding the home to buy back from Flyhomes.

“We can get them a cash offer and be the most competitive offer on the house,” said Flyhomes’ Dibble. “Our offering is designed to level the playing field with the traditional all-cash buyer.”

Housing bubble or not?

The surge in prices and demand in the real estate market brings back memories of the real estate bubble up until 2006. The painful bursting of this boom, which culminated in the Great Recession in 2008, begs the question of whether the market is repeating history.

But lending standards are much stricter than they were before 2006, as buyers are required to provide tax records, paychecks and other information to confirm they can afford a mortgage, and this reduces the likelihood of another housing crisis, experts said.

However, some home buyers are at risk of overpaying, especially those looking to move within a few years: if at some point the market subsides, they may not get their money back.

“If you’re a first-time buyer and you’re young and don’t know if you want to live somewhere longer than three years, it may make sense to wait,” Ratiu said. “The cost of buying a home is not insignificant. If you start a bidding war, you run the risk of overpaying.”

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