By Craig Eissler, CFP®, CIMA®, AIF®, Wealth Advisor
In the midst of the coronavirus quarantine – if life wasn’t crazy enough – my wife and I decided to sell our house and buy a new one in an area on the north side of Houston. Why not add a little more stress to our lives? Being a little skeptical of the timing of this we engaged some realtor friends of ours to talk through how things have changed in the market landscape during COVID.
Everyone’s situation is different. The purpose of this piece is to provide some context and observations about what we experienced – and perhaps a few tips that might help you if you find yourself in the market to buy or sell a house during this time. Every market is different and, from my discussions with various real estate professionals, different markets and different price points will offer varying degrees of market forces as well.
Tip #1: Right now, there’s no ‘typical’ house-buying season
Seeing is as it was the end of summer we figured it was long past the time that any new homebuyers would typically be looking for a house. In a ‘normal’ year most families start the house-hunting process in late spring, early summer so that their kids wouldn’t be changing schools in the middle of a school year. Well, we quickly learned this was not a typical year in the real estate market. Schools were just about to begin but everything was online and virtual. The start of a school year did not hold people back from house hunting.
Tip #2: Homes that offer more elbow room are attracting city dwellers
Plus, it seems that more people from the city were starting to look out in the suburbs so they could get a little more space having been cooped up during quarantine. This may have been something we’ve been taking for granted in the suburbs during this time – having plenty of space to spread out and play in the yard with our kids, whereas someone in the city did not have that luxury.
Tip #3: The law of supply and demand still holds true
So the typical home-buying season was extended, adding additional potential customers to the market as well. When demand is high and supply is low, things can get interesting pretty quickly. More people were looking for houses than were selling.
Once we made the decision to sell our house, got it ready and were ready to list, we were still a little skeptical that we were going to be able to sell our home mid-pandemic. But by the time we listed our house, 30 hours later we had had 22 showings and six offers. Part of that has to do perhaps with my wife’s good taste – no, not just because she married me! She’d decorated and put our house together in a way that made it desirable. Nonetheless it was a pretty good position to be in – one that we did not anticipate.
One thing that was interesting during the showing process was that it was really no different than any normal year without a pandemic. We provided hand sanitizer for people entering our home; for the most part, I understand people wore masks and were very respectful of our home and our belongings.
Selling a house quickly and not having to deal with a long-drawn-out listing was great – but then the roles quickly switched, and we became the buyers. We then realized the fear of not only being left homeless, but potentially missing out on our next great home because we didn’t move quickly enough.
Tip #4: Virtual showings enable buyers to tour homes despite the pandemic
An interesting observation was the number of ‘virtual showings’ that were taking place – where a potential buyer is either unavailable to physically see the house in person (from being out of state) or perhaps is unwilling to leave their quarantine. They would send their Realtor to walk the house while they watched via video conference.
We observed this, too, when we were looking at potential new homes to buy. As demand for certain price points had soared, we jumped at the opportunity to go see a particular home. It had popped up on the market and thanks to technology, we had been notified about it. Well apparently, so had many other potential buyers. When we arrived for our showing, so many cars were lined up on the street that it looked like an open house or one of the neighbors was throwing a party. We were walking the house along with many other potential buyers as well as other potential buyers doing virtual tours. What a sight!
Tip #5: Interest rates are at record lows
Another likely driver of demand has been the fact that interest rates are at historical lows and borrowing money has never been cheaper. According to this chart by Visual Capitalist (https://www.visualcapitalist.com/the-history-of-interest-rates-over-670-years/), interest rates literally have never been lower going back to the year 1350! News outlets everywhere have been reporting how home sales continue to rise as mortgage rates drop. Money has never been cheaper for homes and home buyers appear to be taking advantage.
All of these factors helped to increase the anxiety levels as we were not only building up to closing the sale of our current home but also going through the home purchase process and preparing for closing on that side of things.
Tip #6: Home appraisers are in high demand; it helps to work with a great team of Realtors and lenders
Finding a buyer of our home seemed to be the easy part. Once we had gotten through the negotiation and the option period – our final hurdle was the home appraisal. Typically, that doesn’t play a major role in the timing of closing unless there’s a discrepancy between the sale price and the appraisal price. But this year with home sales soaring, home appraisers are in high demand and very busy.
Banks and mortgage lenders are having trouble getting appraisals scheduled in time for closing. In certain circumstances, the mortgage company may be able to grant a waiver and not require an appraisal. We lucked out and were fortunate to be granted one on our home purchase – otherwise the timeline would have been extended another week or two.
And finally, with the economic uncertainty of all sectors of the economy and unemployment rates in flux, this year especially it’s not out of the question that any potential home buyer could suddenly lose their job. Obviously, this would completely derail the mortgage approval and the home purchase or sale.
Fortunately, we did not experience that on either side of our transactions. Our team of Realtors and mortgage lenders was on top of their game throughout the entire process. What could have easily become a long-drawn-out and stressful experience during an already hectic time was made easier by market forces and an experienced and knowledgeable real estate team.
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