A year ago, most of us were in full lockdown mode, still trying to make sense of stay-at-home orders and figuring out how sheltering in place would impact the real estate market.
When the pandemic was first declared, many transactions fell apart the minute the lockdowns hit, along with numerous listings that were pulled off the market from coast to coast. At that time, no one had any idea about the tsunami-like wave that was building in real estate, about to hit a few months later.
With so many people learning and working from home 24/7, everyone’s spaces became taxed to the max. Suddenly, dense and urban environments seemed cramped and uncomfortable, and it was perceived as hazardous to be living amongst so many people in close quarters.
The dining room table was suddenly used for everything but eating, while closets quickly turned into classrooms and conference rooms. As a result of spending so much time at home and online, people started to surf for real estate listings in more suburban, rural and warmer weather climates. Many liked what they saw and decided it was time for a change.
By working through agents as their “boots on the ground,” consumers started getting bold enough to buy properties sight unseen, hence the beginning of the pandemic real estate boom and a new reality.
Multiple offers, super-low inventory, skyrocketing values and lots of competition from cash buyers have made the current real estate climate both a blessing and a curse. Through that, several real estate concepts were tested and pushed to their limits, while new ways of doing business emerged and became the accepted norm. One year later - Here are 10 concepts that hold true:
1. PricingPrice it right, and they will come. No matter the market, this concept still holds true. In many cases, the price has been so right that it has sparked multiple offers well over asking price.
Overpriced listings are still ripe for lagging on the market, even in the current climate, as well as subject to lower offers. While sellers are particularly ambitious about pushing their asking prices sky-high, the market continues to demonstrate that it will not pay for an overpriced listing simply because it is. There has to be some intangible and tangible qualities to create value.
2. ConditionBefore the pandemic and especially during today’s times, buyers want turnkey homes and do not want to do any work. This has become especially true with buyers looking at properties from afar.
With so many people on the move, buyers don’t want to worry about finding contractors to do work and deal with the hassles of remodeling while making a major move.
At the same time, contractors have only gotten busier, so finding one just to come out and give an estimate is next to impossible. That being said, the market has always been willing to pay top dollar for homes that are in move-in-ready condition versus those that aren’t.
3. LocationPandemic or not, the adage “location, location, location” still rings true. Properties located in highly desirable locations and neighborhoods have continued to do well appreciation-wise before, during and after the pandemic.
Buyers continue to seek out communities and geographic areas that offer desirable weather climates, more space and access to a variety of recreational and social amenities and opportunities.
4. Preparation for saleThis concept has held true before the pandemic and still does today. Homes that are properly prepped for sale fare better on the market versus those that are not.
While there has been a tendency to hastily throw something on the market today given the low inventory and ample supply of buyers, failure to do some prep for sale work can hurt the property’s desirability and salability.
This is often the case after an inspection when buyers get cold feet — particularly after paying top dollar in a competitive-offer situation — and decide to get out of the transaction. The items needing attention could be relatively small expenses, but when added up against bigger-ticket items such as remodeling that will likely be a necessity, a buyer may see a money pit and decide to walk away.
If the sellers take some time to address areas of their home that need attention before selling, they can avoid buyer hesitation or resistance to paying full asking price or over-asking.
Otherwise, the next buyer will surely question why the prior buyer walked away, and inspection results or some version thereof will have to be communicated. That next buyer might grow concerned and wonder if there’s more to the home’s condition than some low-cost fixes.
Spending some time and money doing things like painting, landscape and yard cleanup, decluttering, organizing, pressure-washing, window-cleaning, whole-house cleaning, caulking, grouting and easy updates like light fixtures, ceiling fans, etc., will yield faster marketing times and stronger offers. Not to mention, buyers will be less likely to change their minds.
5. Value/waiver of appraisal contingenciesValue is in the eye of the beholder, and that has never changed — no matter the real estate market. Low inventory may skew the values a bit, but the pandemic has proven that market value is what a buyer and seller agree on price-wise, despite what an appraisal may show.
As of late, that price has exceeded a seller’s expectations far beyond their wildest imagination. However, to buyers who are looking for a place of shelter and comfort in a location they desire to be in, paying what appears to be an exorbitant price is simply an intangible factor for being where they want to be.
As a result, an appraisal is likely to carry less weight going forward as buyers have demonstrated their willingness to waive an appraisal contingency or willingness to renegotiate should a home not appraise, instead of holding that over a seller’s head as a way of control.
6. Real estate as a solid investmentGiven the rapid appreciation coupled with tight rental inventory in many areas of the country, people are continuing to look at real estate as a solid investment and as another way to diversify from the stock market and generate an attractive return.
Rentals have long been a steady and reliable investment vehicle that are gaining appreciation in the market, so people are continuing to look for opportunities in a variety of markets for both short and long-term rentals.
7. Virtual house-huntingIf one thing has become established as a new normal, it is the virtual house-hunt. With technology making it possible to bring the home search to wherever buyers are, they no longer have to try to time their visit with available homes on the market.
That tactic didn’t always work so well in the past, and it certainly doesn’t now. With properties coming on the market and garnering multiple offers within hours, the virtual house-hunt is often the only way to have a shot at scoring a property that the buyers may be interested in.
Rather than stress about trying to escape from work or schedule a last minute plane ride or road trip, if the buyers are successful in getting their offer accepted, they can then arrange to physically see the home during the inspection period.
8. Vetting buyers prior to showingsWhen the pandemic hit, many real estate markets quickly adapted to limiting showings to buyers who were pre-vetted. These buyers would have to supply proof of funds and/or a preapproval letter before a listing agent would schedule an appointment for them to view the home.
Only decision-makers accompanied by their agent (versus an entourage of family and friends) were permitted at the showings. Although these strategies may seem less welcoming from a buyer perspective, the result was that the most serious and qualified buyers ended up seeing homes.
This resulted in faster decision-making. Gone were the sort of serious but half-tire-kicking buyers who returned several times to a home, including a visit to “take measurements,” but never made an offer.
Buyers, sellers and agents have adjusted to this new reality, and sellers and listing agents prefer to manage showings this way going forward. No one likes having their time wasted, especially sellers who often spend hours cleaning and straightening up their home in preparation for a showing. They certainly don’t need a lukewarm or uncertain buyer to come through.
With everyone being more homebound, it has become increasingly difficult for sellers to juggle working and learning from home while trying to accommodate showing appointments in between.
This will also force buyers to truly have all of their financial ducks in a row, as simply obtaining a prequalification letter may not be enough to be able to see a house going forward.
9. Particular closing dates/seller post-closing occupancyThis has become an increasingly common issue when negotiating offers during the pandemic, and the trend will likely continue in the post-pandemic real estate market.
Given the speed at which homes are going under contract, sellers often need additional time to plan their move, whether that’s to secure another place to buy, find something to rent as well as book movers who have been overloaded with a high volume of requests.
In some cases, sellers are declaring a particular closing date requirement based on when their new home will be ready. Buyers should plan on adjusting to this new normal and prepare to be flexible in this regard. In some cases, this flexibility may win out over another offer with a higher price with less flexibility.
10. Open houses with purposeGone are likely the days of open houses for the sake thereof. The market has become too frenetic and compressed for open houses as a recreational weekend activity.
Due to the pandemic, sellers may feel less comfortable about allowing strangers to stroll through their homes that have no particular reason or purpose for safety and security reasons. Open houses being held as the first and only showings are more likely to be the reason for doing so rather than as a Sunday afternoon event.
The pandemic has reinforced existing norms in real estate while creating new ones at the same time. This will result in a more efficient, less chaotic and highly organized process going forward.
It may also level the playing field for sellers in markets who had previously been largely in a buyer’s market where they did not have much leverage to establish rules of the road for their benefit.
The old practice of allowing showings all the time, any time and open houses for fun (but not necessarily profit) have shifted into a more proactive mindset of maximizing showings for the most serious and qualified buyers — which will hopefully result in more than one offer.