If you are in the market to buy a house anywhere in or around Nashville, TN you’re probably getting frustrated.
Our current condition is simple – In virtually EVERY price point and area throughout Middle Tennessee, there are more buyers wanting to buy than there are houses on the market . . . and the builders can’t develop and build quickly enough to fill the void.
The “WHY?” boils down to the massive migration of people relocating from higher cost of living areas of the country . . . Notably North and far West (New York, Michigan, California) to lower cost cities like the good-ole SOUTH. The covid situation exacerbates the problem because many people can now work from home even when their job may be in another state. For perspective . . . even before covid, there were @ 100 people moving into Middle Tennessee EVERY DAY.
Scarcity makes way for rapidly rising PRICES both in resale houses (Competitive Buyer bidding), and new construction. (costs of labor and materials).
Buying a house in this market isn’t for the faint of heart, but I’m going to give you 10 tips to increase your chances of landing the right house for you.
- Hire the right Realtor – Note: I said HIRE the right Realtor which means that you sign an exclusive Buyer representation agreement (Contract). Ideally, this is with a Realtor you already know, like and trust. If you do not know any Realtors, reach out to other people you know, like, and trust to recommend Realtors. Meet with those recommendations. This is not to be taken lightly because THIS is the human who will be working the magic to help you identify and BUY the right house in the right place at the right time. TRUST is paramount in this relationship, so you make speedy, informed decisions.
- Hire the right Lender – Odds are good that the Realtor you hire will recommend a lender with an already baked-in established relationship. When a Realtor and Lender are in sync, impossible things happen. These are the 2 essential Co-Captains for the duration. With seamless communication, things don’t fall through cracks and danger signs ahead provide preemptive ACTION thereby decreasing the possibility of gut-wrenching surprises. This lender will help you find the right terms for your loan. Other than CASH, Conventional financing is your least path of resistance but will likely require more down-payment than FHA/VA both of which carry an unfounded bad reputation with some Sellers. Work with the lender to secure a Loan Approval (subject only to Appraisal and final underwriting in hand) prior to looking at any houses.
- Closing date: Arrange your near-term life such that you can accommodate the Seller’s wishes regarding Closing Date and even the Possession (move-in) date. Your Realtor will likely contact the Listing agent prior to structuring your offer so as to pick up on the seller’s desires . . . This makes it possible for your (buyer) to build a SIMPLE and CLEAN offer . . . One that is easy for the Seller to ACCEPT with minimal changes.
- Bring Cash – At the closing, the Seller will be receiving CASH. In a multiple offer situation, many buyers will focus on PRICE with the rationale that the highest price will win the house. This can be problematic . . . What if the appraisal doesn’t align with the inflated price (More on that in #7)? The more cash you can bring to the table increases the likelihood of a WIN. When all of a Buyer’s purchase ability is financed, this speaks weakness . . . Asking the Seller to pay Buyer Loan Closing costs and prepaid expenses gives most sellers pause. Consider tips 5-10
- Competitive Strategy – Every purchase and sale agreement has myriad contingencies and requirements. How SIMPLE and CONVENIENT can you (buyer) make it possible for the Seller? What can we do to decrease complexity and uncertainty? Waive non-essential things like Home Warranty or other “Special stipulations”? . . . Craft an offer that’s “Just the Facts” – Keep it Simple!
- Pay fees traditionally paid by the Seller – When the buyer takes care of those pesky expenses, that cash goes right to the bottom – into the smiling seller’s proceeds – Like Title expenses and HOA transfer fees – I won a house because I recommended the Buyer to allow the seller to leave a crawlspace FULL of debris – It was creative, and we had a garage sale to dispense with it 🙂
- Appraisal – All too often, the frenzy of buyers drives the price above the realistic appraisal value. All-cash Buyers will sometimes waive the contingency on satisfactory appraisal. For the rest of us mortals who must have a loan, this can be problematic and often results in failure of that deal. Exuberant buyers sometimes take wild (less creative) chances – roll of the dice. The savvy Realtor and Buyer might propose a lower Price and come up with ways for the buyer to pay some of the Seller expenses.
- Inspection – The home inspection is another piece that can blow a deal apart. We Realtors are seeing MANY houses coming on the market “underconditioned” . . . Like the seller put lipstick on the pig . . . A coat of paint and throw it on the market . . . The flaws reveal themselves to the home inspector who tells the real truth. “Handy” buyers might offer to do a pass/fail inspection – accept it warts and all, or walk away from the deal. Others might even waive the Inspections altogether. We are seeing a fair number of deals crash at this stage of the game because the sellers are in the frame of mind that they can toss it back on the market and re-sell it in a few hours.
- Realtor Commission – PLEASE understand this is NOT a strategy to REDUCE any Realtor commission . . . Realtors deserve every penny of their commissions. Typically, the Seller offers X % of the Purchase Price to the Buyer’s agent. This offer is made in the MLS and confirmed with a Commission Agreement. It IS OK for the BUYER to pay part or more of the Buyer agent’s commission thereby reducing that commission expense to the seller. Yet again – another creative way to add benefit to the Seller with cash – straight to the bottom line.
- Escalation Clause – This is a tactic that Realtors either LOVE or HATE (there’s no in-between). The Buyer submits an offer with language something along the lines of: “Buyer will pay $1000 more than the highest competing offer up to $XXX,XXX”. Things can get very interesting if there are multiple offers with escalation clauses – Makes my head spin. In my opinion, this is risky business. It smells like an auction, and we Realtors are not licensed to conduct auctions. More so is that many Sellers get “turned off” by the game playing tactic. I’ve seen many of these escalation clauses be summarily rejected.
If I were to get into details, this topic could turn into veritable suspense drama.
My hope is that this sheds some light on the importance of having professional Realtor representation with every purchase and sale of real property.
Of course, I’d love for you to choose to work with me or any of the fine “Vital Few” Realtors of Pareto Realty
Drop me an email, and Let’s GO!