How to cope with the frustrations of an overheated Boston real estate market
Stop me if you’ve heard this before. Chris and Jennifer have had a very frustrating month, putting three offers down on three different condos they loved, only to lose all of them to buyers who significantly outbid them or came in with an all-cash offer. Sound familiar?
In a normal market environment, inventory is healthy and proportional to the number of prospective buyers. In a normal market, the premise of “a home for every buyer” exists and the majority of serious buyers happily find a new home after a productive search. Results are satisfactory and frustration levels are healthy.
Unfortunately, the Boston real estate market in the last few years is anything but normal from a buyer’s perspective. Historically low interest rates, VERY limited inventory, and a great influx of buyers have all contributed to the current market frustration.
I recently listed a lovely parlor one bedroom condo in Boston’s South End. Minutes after I posted the property to MLS, reverse prospecting indicated there were nearly 2800 prospective buyers. This number is music to a seller’s ear but not so much for a ready, willing and able buyer. After 14 years as a real estate broker, I am astonished with the demand we are seeing these days.
As an example, a well-qualified couple is looking to purchase a two bedroom home in the city. Both husband and wife are well-educated, enjoy successful careers, earn above average income, have solid credit and a healthy down payment they’ve worked hard to save. During their search they repeatedly lose properties. In every instance, another buyer was willing to pay a price substantially above the asking – often not in line with property market value or trajectory of growth – with many buyers able to pay cash and remove all contingencies regardless of potential risk.
The premise of an easier market during the winter or summer (traditionally known as the slow market seasons) has long gone. Buyers are now searching throughout the year and properties sell at the speed of light in January or August.
All of these factors have created much frustration.
As a broker, I have tried to find ways to make the process easier for my clients and allow them an edge over other buyers.
If you are looking to better your chances I highly recommend:
1. View all prospects ASAP – DO NOT wait for a Sunday open house if your broker is able to schedule a private viewing prior. Make your search a priority! If you don’t, others will beat you to the punch.
2. Present a clean offer – try to reduce the number of contingencies and avoid requesting seller concessions.
3. Be flexible on a closing date – this might give you an edge over a buyer with a higher offer but a less flexible closing date.
4. Pay what the place is worth to you – in this low mortgage rate environment paying a tad above asking may not translate to a substantial change in your monthly mortgage payment. Ask your mortgage broker for a chart reflecting monthly payments for various purchase prices. Your realtor can also provide neighborhood sales data so you can make an educated decision. Go only as high as you feel comfortable.
5. Don’t overreact – frustration leads to fatigue, and fatigue often leads to bad judgment. Remember that market conditions do change and that it is okay to participate but not to overreact and possibly overpay.
6. Let your broker help – a calm and experienced broker can assist you with putting together an attractive offer even if the odds seem to be against you.
7. Keep your chin up and dwell on the positive. Make sure to keep things in perspective and take advantage of learning the market and the process as you go about your search. This will most likely not be the last time you will be on the market for a home and getting familiar with all aspects of a real estate transaction, in particular during frustrating times, can be a blessing you will benefit from in the future.