Home prices up more than 7% in Centre County. Here’s how to craft competitive offers
High home prices in Centre County are creating a sticky situation for buyers, as median list prices have reached $297,000 in Bellefonte and $525,000 in Boalsburg.
Those figures are according to Realtor.com, which reported in a market analysis that the county’s median list price had increased 7.4% year-to-year as of April. The value of median days on market is down to 48, two days shorter than in March and 15 days fewer than in February.
Since houses aren’t staying on the market as long and many sellers are receiving multiple offers, driving the sale price above list, buyers aren’t getting as much time to mull over a potential offer or return for a second showing.
The pressure is on as buyers enter multiple-offer races, but some compromises may not be worth it in the long run.
To help buyers and sellers alike navigate the hot and stressful market, we spoke with a local real estate agent about best practices. Here’s what she said.
What challenges does the current market pose to buyers?
As Centre County is in a seller’s market, buyers find themselves forced to make compromises, such as paying far above appraisal values and sometimes waiving inspections to field competitive offers.
Annette Yorks, a local real estate agent, said she dissuades her buyer clients from forgoing inspections.
“We’re already seeing where I’m talking to septic people, and septic issues are becoming a big problem because people didn’t do inspections,” Yorks said.
Fixing these septic issues can cost anywhere from $10,000 to $30,000, Yorks said, and the price tag depends on the size of the system. Homes may also have structural issues buyers will be unaware of if they do not utilize an inspection.
“It can be a real mess. And I think it’s going to be, I think we’re going to see some repercussions of this,” Yorks said.
There’s also an issue of financing. Centre County’s inflated list prices due to the market’s supply and demand creates appraisal gaps.
If buyers meet sellers at their high asking prices, they may experience a problem securing loans because banks will only lend amounts proportionate to appraised value, which doesn’t take into account the high demand and low supply of the current market.
Yorks said some transactions are falling through because of these gaps, but savvy listing agents will ensure buyers have cash to back up their offers.
In a time when buyers need to be ready to shell out cash, Yorks said buying power is reduced by higher interest rates.
“Every percentage point that the interest rates go up cuts a buyer’s power by 10 percent,” Yorks said. “We’ll say a $300,000 house – well, if the interest rates go from 4 percent to 5 percent, that just cut that buyer down to $270,000.”
Although buyers face tougher prospects in this market than what is typical in recent years, there are ways to make your offer more attractive to a seller.
How can buyers make competitive offers?
The primary factor in sellers accepting an offer is, of course, the dollar amount tied to the contract.
While buyers can’t help if they don’t have enough to meet high price tags for desired homes, Yorks said they should look at homes listed for 5% to 10% below the top of their budget. This way, you can compete with above-list offers.
Buyers should always come to the table with pre-approval letters, Yorks said. Since many sellers receive multiple offers right now, making an offer without a pre-approval letter will likely put you behind the rest of the pack.
Another way to put forward a stronger offer is to include a healthy down payment with an escalation clause, Yorks said. If you’re putting 20% down on a home, then you should make an earnest deposit of $15,000 to $20,000 to get a seller’s attention, she added.
You should tailor your offer to the seller’s unique circumstances. Consider if they are looking for a quick closing period, Yorks said.
To take into account appraisal gaps, York advised putting a clause in your contract saying you’re willing and able to pay the difference between the agreed upon price and appraised value. Provide proof of the funding you plan to use to bridge this gap.
This story was originally published May 12, 2022 at 10:59 AM.
