In January, Hillary and Nicholas Fredrick’s plan to relocate from Tennessee to the District seemed to be materializing. On a whirlwind trip here, they looked at 35 houses, made an offer on the one they liked and signed a contract with the sellers.
That deal fell through when the sellers’ financing hit a snag. But when they moved here in March to begin their search anew for a house in the $500,000 to $550,000 price range, they discovered that the market had changed considerably.
Almost overnight, there were competitors on every house they bid on. “We’ve seen about 60 homes so far” and tried to buy three of them without success, said Hillary Fredrick.
If you’ve dipped a toe into the Washington-area real estate market these days, you know it’s returned to an era of multiple offers, escalation clauses and competitive bidding. According to RealEstate Business Intelligence, the active inventory of homes in March was down more than 25 percent from March 2011. Increased demand, driven by such factors as a stable local economy and low interest rates, has created a seller’s dream and a buyer’s nightmare.
Sellers are in heaven; buyers are feeling the stress. These days you can go to any open house of a home in good condition in a desirable neighborhood, and you’ll find you’re one of a steady stream of potential buyers. Sleep on it before making an offer? Too late; houses that are in good condition and well-located (especially walking distance to Metro or major bus routes) are under contract in one to two days.
What’s a buyer to do? “You have to make buying a house your number one priority,” said McEnearney Associates realty agent Coral Gundlach. That means having your financing in order, knowing exactly what neighborhoods you’re interested in and the realistic range of inventory and pricing in those areas, looking at houses as soon as they’re listed, and being flexible on contingencies and pricing.
Plan for a larger down payment
First, get your financing in order. A simple lender’s preapproval letter based on a phone conversation used to be plenty to get started. Now, to qualify for quick closings, you’ll need to have already supplied the paperwork showing your assets and income. After your initial conversation, meet with your lender and supply this documentation as soon as possible.
If you already own a home and you need to sell it to buy a new one, sell it. Do the necessary work to make it show well, but be realistic about your time frame. In this market, you can’t expect to win a contract on a new house if your financing is contingent on selling your current home.
If you’ve saved well and plan to temporarily cover two mortgages so that you can buy a house before selling your current one, check this plan thoroughly with your lender. Regarding purchasing while retaining an existing home vs. selling first and then purchasing a new home: “We run the numbers both ways up front for pretty much anyone,” said Nick Pakulla, loan officer with First Place Bank in Rockville. In the current hot real estate market, “there’s no magic bullet anymore,” he added. “The most important thing any good lender would do is make sure you can qualify for the new mortgage non-contingent.”
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