Why It’s Becoming a Challenge for First-Time Buyers
In recent years, the process for first time buyers looked like this: Very straightforward.
First, get approved for a loan.
Secondly, decide if you’d like to offer on resale homes, new construction – to be built, or new construction – already constructed.
Thirdly, make your offer.
Resale sellers were fielding zero to one or two offers and willing to accept listing price terms from qualified buyers using loans. They weren’t seeing many full price cash offers. They were renegotiating sales price terms if appraisals were coming in less than asking price in our slightly increasing market.
Now, there is as little available for resale as we’ve ever seen (see graph below). Buyers are having to increase their offers significantly above list price. They are needing to increase their downpayment amounts to compete with cash-heavy out-of-state buyers. Buyers are having to waive their right to terminate the contract if appraisals are falling short in this new rapidly price-increasing market.
Almost all new construction communities were allowing buyers to enter into contracts on homes to be built in the future with relative ease.
Now buyers are jumping on the bottoms of waitlists with dozens of other buyers just hoping to land a future lot. Or they are entering the lot-bidding lottery…where lots are released 5-7 at a time and buyers throw highest and best offers, just to secure the lot.
Completed new construction inventory was a way for buyers to walk into brand new homes, tour their eventual home on the spot and make their offer.
Now, zero, if any, completed new construction inventory even exists at this time.
Why It’s Becoming a Challenge for Move-Up Buyers Needing to Sell First
Buyers looking to sell their property and move up into other resale inventory was an easy transaction. We’d list their home first, find their buyer, all while helping them choose their next home to time up closing dates without much issue at all.
Now resale homeowners have so much leverage, they are choosing to work with buyers mentioned above who aren’t contingent upon selling a property, instead of buyers who will be needing to sell to procure bank financing.
Move-up buyers were able to go under contract on new construction that was to-be-completed, even with a property needing to be sold. Before construction completion, they would pick out a lot, start the building process, and sell their home as construction completion nears.
Now, many builders are no longer choosing to enter contracts with contingent move-up buyers needing to sell another property until partial construction completion has occurred – and often by that time, another non-contingent buyer has already scooped up the property.
And just like first-time buyers, move up buyers are struggling to find completed new construction anywhere as they’ve all been scooped up.
This might have you wondering – how the heck do we move then?
Best Case Scenarios:
- Cash Buyer – why wait for financing to finalize as a seller if you can sell it to someone for cash and remove the appraisal and third party financing from the situation? Having cash is the most likely way to secure the property you want.
- Financing Non-Contingent Upon the Sale of Property – if possible, selling first for top dollar, spending time in temporary space (short term rental, stay with family) and then making your purchase could remove the sale contingency from your offer.
- Take Advantage of Your Realtor Relationship – with the right Realtor in place, you should
- be able to learn about sell-before-buy cash programs
- be able to leverage their builder relationships to get to the front of new construction opportunity before others
- be able to leverage their realtor relationships to gain access to resale inventory before other buyers
- be able to structure your offers terms competitively to stand out in a crowded market of buyers making offers.
Every situation is different.
Set a time to talk with our team HERE about your specifics and let’s build the ideal plan for your family.