Maryland today | A boiling real estate market calls for cleaning your closets or your bank account


In this year of home auction war, get ready to shout “Load up! Or waving the white surrender flag depends on which side of the white fence you are standing on.

Potential buyers in the United States face fierce competition for limited inventory as low mortgage rates and pent-up demand drive the seller’s market. Sellers, on the other hand, see multiple (and even all-cash) offers, often significantly above both asking price and appraised value. The result: Home prices in March rose a remarkable 13.2% a year ago, according to a leading national index.
Elinda F. Kiss, clinical associate professor of finance at the Robert H. Smith School of Business at the University of Maryland, has been following the frenzy of the market closely and shared her insights in a recent interview.

Why is the market so wild right now?
To boost a depressed economy due to lower spending during the 2020 pandemic, the Federal Reserve cut interest rates and pumped hundreds of billions of dollars into the markets through securities purchases. Then last spring, no one was able to visit a house for sale due to the pandemic quarantine, and by the fall, demand was pent up. Low interest rates have also allowed buyers to pay more for a home.

As a result, in today’s landscape there are simply more buyers than sellers, and homes move quickly, often for more than asking price. For example, our daughter had to bid $ 20,000 more than asking price because she had outbid 20 previous houses.

Any tips or tricks for success if you find “THE” house?
If you are willing to make a cash offer, you have an advantage because sellers know the sale can close quickly with no unforeseen events. But to improve your chances of seeing an offer accepted in that market, you may need to act quickly and get creative.

What advice would you give to buyers who are not swimming in cash?
If you can, get a pre-approval letter from a reputable lender; this letter will show that you are creditworthy and can afford the mortgage you will need to borrow to purchase the house. Sellers want a buyer who can close quickly and can be flexible about the closing date.

Second, try to make a “clear offer” without the unexpected. No seller wants to accept an offer that fails within weeks if the valuation is lower than the agreed sale price.

Plus, explore homes before they are officially listed with virtual tours so you can submit the offer to purchase your dream home as soon as you see it in person. As of April 2021, 47% of U.S. homes were on the market less than a week before an offer was accepted. (We sold our house last fall. Of the seven couples who watched it on the first day it aired, five couples sent in one-day purchase contracts.)

And you’ll need a good local agent who understands the market, can present your offer professionally and quickly, and has a good idea of ​​the home’s selling price.

Finally, prepare for a bidding war with a plan that allows you to act quickly. To avoid paying more than you can afford for a house you want, consider in advance what you need to have in the house; identify what is not negotiable and where you are willing to be flexible.

What advice would you give to sellers who want to get the most out of this market?
First, declutter your home by donating, throwing, or storing much of what’s in your home. The buyer wants to imagine their furniture and memorabilia in the house, not see yours. Also make sure that the front of the house and the yard look great; first impressions are important.
Don’t go too far in renovating or repairing your home. Buyers may want to make their own changes and generally won’t want the upgrades you’ve made. Plan the necessary repairs. Maybe get an optional home inspection to identify any issues.

Is the market so hot that we are heading for another crash?
While the 2008 decline was frightening, with nearly 9.3 million borrowers losing their homes to foreclosure and short selling, today’s market is different.
First, mortgage standards have improved. In the early 2000s, it seemed like as long as you were alive and breathing, you could qualify for a mortgage. Subprime borrowers, who did not make their monthly payments on time, still qualified. Lenders did not verify borrower income, which led to “liar loans“. Reviews were often ‘drive’ – is there a house there? Okay; he evaluates. But today, due to improvements in underwriting technology and quality controls, it is difficult to qualify for a mortgage.

Second, there is always a shortage of homes for sale. In 2008, there was an oversupply of homes for sale; the resulting drop in prices put many new homeowners “under water”, causing them to lose their homes.

Third, homeowners have equity in their home. During the 2004-07 bubble, many homeowners took out home equity loans to buy a second or third home. With the prices falling, these homeowners found themselves in a negative equity position; as a result, they have “moved away” from their homes, resulting in an overabundance of foreclosures and short sales, further depressing prices. Today, over 50% of homeowners have more than 50% of the equity in their home.

This interview has been condensed from an original version available on the Smith Brain Trust website.

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