With Nathan Johnson from Thumbprint Realty and Cheng Zhang from Thread Real Estate
Interview by Lorena Villatoro, ABCDC Housing Counselor
The sting of rejection hurts in any form, but the last thing buyers want to feel when putting in an offer for a potential dream home is rejection. After months of saving, planning, and hunting for your dream home, the keys to your new house still stand behind getting your offer accepted. With the current scarcity of real estate in the current housing market, a surge in competition has pushed buyers into taking new risks to make their offers stand out.
How often are people deciding to bid over-asking in this market?
N: Frankly speaking, it’s become quite the norm. Since about 2020, the amount of offers I’ve written at or below asking can be counted on one hand. I’ve seen Between $5,000 and $30,000 over-asking] depending on the location. You’re most likely going to overbid in areas close to or in the city of Boston for example. Suburbs like Sharon may have competitive offer bids due to their amazing school systems. It honestly depends.
C: It depends on where you are looking and the market—real estate can vary from street to street. For example, [properties in] Melrose [are] selling 11% on average above asking. So, a single-family home in Melrose today you probably always bid over asking, but on the other side of the spectrum like East or South Boston, newer development – new housing, new condos being introduced into the market and the newer condos are really expensive, but you could probably buy one of these properties without overbidding.
Working with a knowledgeable agent so they can get localized data to advise you whether overbidding on a property should be within your negotiation strategy. Some of the problems with overbidding include: 1. If you over-bid, you will have to cover the gap between the appraised value and what you offered to purchase the property for. 2. There is no guarantee that the property will increase in value, and you may end up owing more than what the property is worth.
What are some risky things homebuyers are doing to make themselves look more competitive?
N: Most are skipping [their home] inspection. Some are waiving appraisal altogether, but skipping inspection has to be the riskiest move yet.
C: Skipping their home inspection contingency and underestimating the cost of repairing their house and buying a really distressed property they have to live with.
What are some risks with waiving your contingencies?
N: [The degree of risk] can range from [moderate] to severe depending on the [contingency]. For example, waiving your inspectional contingency may make you miss relevant or dangerous information with regards to the operation and safety of certain utilities. Waiving appraisal may have you grossly overpaying for your home that you may or may not wish to sell in the future.
C: There is an infinite number. You could move into your house and discover massive structural termite damages which could cost you hundreds of thousands of dollars to repair if you waive your inspection contingency. If you don’t have your finance contingency and for some reason the bank won’t lend you the money, you will still have to follow through with the purchase or lose your deposit.
How can buyers lower the financial risk of waiving contingencies?
N: As mentioned and if possible, bring a professional you know or are introduced to when you see houses. If you’re waiving contingencies, speak to your agent and make sure you are aware of the consequences and what may or may not come up. Remember that nothing worth having comes easy, and there is risk in just about everything that we do. This is the BIGGEST purchase that one can make in their lives, and easily the most nerve-wracking for some. Education, experience through those who’ve purchased or work in this field, and an amazing agent will guide you to the best decision you can make.
C: Contingencies are not “black and white”, there is nuance in the art of negotiation. Work with your real estate agent and point out specific issues are you are worried about whether it’s the foundation, damage amounts – get specific with it and communicate to the seller you are serious about the transaction.
What are things buyers can do in this market to look competitive?
N: This has a lot to do with prep, but one thing for sure a new Buyer can check is how fast their lender can close. A fast-closing time can be the difference between “Hello? Yes, my clients are going with your offer” and “We decided to go in a different direction”. There are Sellers out there who simply want to accept an offer and sign the papers. No muss, no fuss, and certainly no delays. [Other things] letters to the owner, overbidding, waiving certain contingencies. The right offer depends entirely on terms, intentions, and what you (the buyer) and your team are capable of.
C: Flexibility with move-in and closing dates and stepping up to fix things before you [the buyer] own the home. Writing a heartfelt letter to the owners can be helpful too, it makes the transaction personal.