When you are in the market for a new home, you expect to have listings to see - right? Right now, the Denver metro area is down around 50% over last year's active listings this same time!
What is happening in the market? With so few listings, it is tough to set showings at properties, as the showing windows are either 30-60 minutes. On occasion you will see 15 minute windows, but that really makes it tough for buyers and buyer agents. With COVID, there are no overlapping showings, and only the buyers on contract and agent are usually allowed in the home at one time. All precautions are to be taken - masks, wipes, gloves, etc.
What is happening with the home values? We are seeing 10-12% increases in home values. With so much demand (low interest rates) many homes are seeing multiple offers, and offers WAY over list price. And, some homes are priced higher than fair market value. When you get offers way over list price, the buyers need to define what happens if/when the appraisal (if financing is needed) comes in low. Buyers offer to make up the "gap" between the appraisal and contract price. These monies are over what they need for down payment and closing costs.
The appraisers are being a bit more lenient with their values, knowing there are not enough listings and buyers are scrambling to secure a home. But, they are still usually not able to turn in value for the contract price, and buyers are still on the hook for the difference between appraised value and contract price.
The bank will not loan over appraised value, so that is why the "gap" needs to be defined in the contract.
We are seeing some creativity in this market - rather than having a contingent offer, buyers are securing hard-money loans that do not require appraisals, then refinancing into a regular loan after it closes. (BUT, be sure you have enough cash to make up the difference you are offering on the new home.) The interest rates for these loans are 12% and higher! This could be a dangerous financial decision if you do not know what to expect, and have a good plan in place.
This scenario is not only in the lower price points, have seen this in the $million homes as well. As I write this post, we have 2,427 active listings. The population of the Denver metro area is almost 3 million, and this small number of listings is for single family, condos and townhomes. (no land) Back in 2008, when homes were not selling, we had at least 25,000 listings to give you an idea of how few listings we currently have.
Hopefully in the next few weeks we will see more homeowners put their homes on the market. If my homeowner needs a replacement home, I always put in MLS, contingent on finding the replacement home, so my client is not homeless. That is not a word I want to use in my vocabulary.
If you have thought about listing, give me a call! I have experienced multiple offers (20) and guided my Sellers through many offers to accomplish their goal of selling!