It’s no secret that here in the San Francisco Bay Area the market is red hot: rock bottom housing prices, unbelievably low interest rates and an unprecedented pent-up demand have all combined to produce a tidal wave of buyers that’s hit the Bay Area market like a tsunami – wiping out all inventory in its wake.
Consequently, it’s hard to view any home without standing in line for access – especially on weekends. Typically, an offer date will be set and multiple offers pour in on just about every home – we’ve seen as many as 60 offers submitted by hopefuls. There’s an additional factor here as well – investors have figured out that if they are going to buy at a bargain, now is the time. As a result, cash is pouring into the market like coins out of quarter slot machine that just hit big. At last check, some East Bay cities are seeing cash transactions running about 30% of total closings.
It’s a market gone mad and, for first-time homebuyers, it’s almost impossible to land a home without doing something to differentiate yourself.
And therein lies the problem.
I met with a couple recently who’d been working with another agent. Typical of many buyers, they’d been searching a while and been blown out in numerous offer attempts. In desperation, and at their agent’s suggestion, they finally relented and submitted an offer way over asking price with ALL contingencies removed. They were excited to discover that their offer had been accepted and, a month later, they moved in to their new purchase.
And immediately began wondering what had just happened.
Confused, they called me for advice. Since they’d purchased with no contingencies, they’d decided to forego getting their own inspections and relied solely on seller-provided reports. They’d only visited the property once during a crowded open house and didn’t pick up on the fact that it was in less-than-ideal condition. Carpets had been covered with runners, concealing numerous spots. To make things worse, they didn’t do a final walkthrough. Upon opening the front door after closing, they were flabbergasted to discover a house that was filthy, horribly spotted carpets and piles of trash in the garage.
“What now?” they asked. “We don’t want this house. What can we do?”
I ran a CMA (Comparative Market Analysis) and discovered, sadly, that they had indeed they paid too much. We also discovered that, in a very rare happenstance, the appraiser had actually signed off on the inflated value. Based on the comps, they’d need to wait for the market to increase enough so they could liquidate and just break even. Even at the current rate of increase, they’d need to wait a while.
“With frustration imprinted over their faces, they asked, “What went wrong?”
As stated above, current Bay Area market conditions are making it almost impossible for buyers to land a home. Many buyers, infuriated with numerous failures, resort to desperate tactics. And, sadly, some agents do nothing to moderate this.
For Realtors, it’s a real conundrum: you want your clients to get a home, but what lengths do you suggest they go to in writing offers?
How high above asking price? What contingencies should be removed? What other gimmicks can you employ to get your offer accepted in the face of extreme competition? In a recent multiple offer situation, a listing agent called and informed me, “You have the leading offer, but my sellers want the buyers to reduce the loan and appraisal contingencies from 14 to 10 days.” I informed them, “You and I both know that’s absolutely impossible with an FHA buyer,” to which they responded, “Well, do you want it or not?”
Once again, it’s “Buyer Beware.”
In California, there is no rescission period when buying a home. Additionally, once it closes, there’s no out. Similar practices in the heyday of 2004-2005 spawned numerous lawsuits from buyers who, after the dust settled, had a bad case of buyer’s remorse and questions about their transaction.
Regardless of how badly you may want a home, be very, very cautious. If you are not, your final price tag may be WAY higher … than you actually intended to pay.
No Morning After Pill in Real Estate, Buyers Crying Foul Over New Market Tactics, Final Price Tag Too High For Some Buyers, Alameda County, Fremont, Castro Valley, multiple offers, no contingencies, removing contingencies, loan contingency, appraisal contingency, inspection contingency, inspections, reports, Cash Offers Overheat Housing Market