- The Washington Times - Friday, March 17, 2000

The Washington-areareal estate market is in the midst of a profound seller's market, makingit difficult for many buyers to find homes they like, or to actuallypurchase the ones they manage to find. "We are very empathetic with buyers," says Ruth Dickie, manager ofLong & Foster's largest office, Bethesda Gateway. "You need to have astrong stomach to go home shopping these days."
After a decade(1988-1997) of wallowing in a slow buyer's market, the local marketturned around quickly as the economy took off in the late 1990s. Thenumber of homes on the market fell dramatically, as weary sellers foundthemselves swarmed by eager buyers. The number of sales rose sharply, asfinancially secure buyers finally took advantage of low interestrates.
It's a whole new world out there. Home buyers today need toknow what they are facing and be prepared for an entirely newhouse-hunting experience.
"Know what you are looking for," advisesDavid Rathgeber of Century 21, Laughlin. "When you see the home that isfor you, don't sleep on it until tomorrow. Have your agent call thelisting agent immediately. If you have to think about it, forgetit."
Mr. Rathgeber recommends that buyers constantly be available tolook at new listings their Realtor finds. "Every day if necessary," hesays. "You won't have many to look at, even if you are looking at a bigarea and in broad price range. There just aren't many homes outthere."
How did Washington get to this point? Just two years ago,sellers were the ones needing help. Now it's the buyers who have tostrategize.
Here's how things have changed: If you were shopping for aMontgomery County home in January 1995, you would have enjoyed choosingfrom 5,000 properties on the market. You would have encountered littlecompetition from other buyers, as there were only 438 sales that month.And with the low interest rates, you could have afforded many of thehomes on the market, because they had appreciated very little since the1980s.
Flash forward to January 2000. You are ready to move up to alarger home. In Montgomery County, you would find only 2,200 homes onthe market but a ton of interested buyers. There were, in fact, 824sales in January. Competition was fierce among buyers, and sellers couldwait for the offer that suited them best. They wouldn't have to waitlong, however, because the average home was on the market for only 64days.
Buyers in January also found that the cost of buying a home wasrising, as interest rates crept up, and strong competition pushed homeprices higher.
In such a market, it is essential that buyers getpreapproved for their loan, that they work with a buyer's agent who willrepresent them and that they have cash on hand for their earnest moneydeposit.
Those are the basics. Realtors also are responding to the newmarket with clever new tools to help their buyers get a jump on newlistings.
About six months ago, the Metropolitan Regional InformationSystems database was upgraded with a high-tech feature. Agents who areworking with buyers enter their clients' criteria in the computer. Whena home for sale that matches these criteria is entered in the databaseby a listing agent, the computer sends an e-mail to the agent.
Thisway, buyers can be notified within hours of a new home on the marketthat might suit their needs. They can, that is, if they are using anagent to help them buy.
"I get calls all the time from buyers who arejust driving around, looking at for-sale signs," Mr. Rathgeber says."Those folks are really behind the times if they are serious aboutbuying, because dozens of agents have already looked at that home withtheir buyers, maybe even before the sign went up."
If you aren'tworking with a Realtor who has access to the MRIS, you are missing outon the most important tool buyers can use in this hot seller'smarket.
"Print ads and the Internet don't work for the same reason assign shopping," Mr. Rathgeber says. "Realtor.com only gets new listingsonce each week. It's just worthless if you are really looking forhomes."
If you want to look at homes on line, try Homesdatabase.com.New listings are posted there every day, improving the timeliness of theinformation.
Buyers who actually find homes they like and can affordstill have a challenge ahead of them: Competing with otherbuyers.
"I've seen five contracts on one home presented within a weekto 10 days," Mrs. Dickie says. "We still see many clients who buywithout facing multiple contracts, but any neighborhood that isdesirable or close-in will be very competitive."
When you offer acontract on a home for sale these days, you should expect to competewith other buyers. So how do you win the home you want?
"Buyers needto present as few questions as possible," says Mrs. Dickie. "Sellerswill take the contract that is best for them."
That will likely be acontract that is for full price, even more. It will also have fewstrings attached. The winning buyer won't insist on a home warranty orhelp with closing costs common concessions buyers could expect just afew years ago.
Mrs. Dickie's agents have a list of such strategiesthey share with buyers who are facing a bidding war. Some of the ideasare bold, even drastic.
"We ask buyers, 'Do you want to make an offeron this home, or do you want to buy it?'" Mrs. Dickie says. "If theywant to buy it, there are lots of things they can do."
One of thedrastic measures some buyers are taking is skipping the homeinspection.
"Most buyers say no way at first," says Emelia Beltran,associate broker with Nova Properties. "It makes them nervous, and Iagree with them. But I explain they may have to do this if they want tocompete."
Home inspections are an important safety net for buyers,because a professional inspector can spot hidden flaws or defects in thehome that could become expensive problems later on. Sellers will usuallyembrace an offer to skip the inspection, because paragraph 12 of thestandard purchase contract obligates sellers to repair some basic items,such as plumbing and heating.
"In a multiple offer situation, at leastone of them will probably have a no inspection clause," says Mrs.Beltran.
"I believe all sellers should have their home inspectedbefore it goes on the market, anyway. If they did that, they could takecare of any major problems, and display the results in the home. Thatwould make things easier for everyone."
Another option for buyers isto request an inspection, but offer to pay for any paragraph-12deficiencies that are found.
Other basic requests buyers used to makewere contingencies for financing and for the appraisal. A financingclause lets the buyer out of the contract if they fail to get a loan forthe contract price. With many buyers now preappproved for their loans,this contingency is not seen as often.
Deleting the appraisalcontingency is a bit more risky. Lenders don't like to loan more than ahome is worth, so an appraisal estimating the property's value isperformed before settlement occurs.
"Many sellers today won't considera contract that includes an appraisal contingency," says Mrs. Dickie."We don't recommend these kind of strategies, but we present them asoptions buyers can use."
If you leave out the appraisal contingency,the lender will still have an appraisal done. What you lose is yourescape from the contract if the home appraises for less than the loanamount.
"In that situation, some buyers are willing to pay thedifference to get the home," Mrs. Dickie says.
Buyers are also findingthat, in many parts of the Washington market, you have to offerfull-price to be considered.
"If you see a home you like, you can betsomeone else likes it, too," Mr. Rathgeber says. "If you make an offer,it is a waste of your time to offer less than full price. It doesn'tmake buyers happy to hear that, but it's true."
Some buyers are evenresurrecting the escalation clause, a strategy used in the hottest yearsof the mid-1980s. An escalation clause tells the seller that the buyerwill pay, for instance, $2,000 more than any other offer, up to a setmaximum.
"I'm about to write a contract for a couple I'm workingwith," Mr. Rathgeber says. "This will be the fifth home we have made anoffer on and we've been making good offers all along. It is just very,very competitive out there."

Copyright © 2019 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.


Click to Read More and View Comments

Click to Hide