The name of the game for American Canyon and the surrounding areas continues to be a severe shortage of inventory. There are only 5 active homes on the market in AC this morning, only 55 in Vallejo, 47 in Fairfield, 9 in Benicia, and 9 in Suisun City. This leaves a total of 125 active homes on the market in the entire region. Up until the pandemic slowed everything to a crawl, both Vallejo and Fairfield would have that many homes on the market by themselves daily…and people were already talking about how tight inventory was last year. I’m hearing reports that one listing in Vallejo recently had 40 offers! It had almost as many offer as there are homes for sale.
Most surprising of all is that inventory actually retracted in February. There were almost 10% fewer new homes on the market last month then in January. Even more dramatic, inventory has decreased by over 60% from February last year. As a result, the median home sales price in the region rose 5.3% year-over-year. Interest rates are still near historic lows (hovering between 3-3.5% as I write this) and there is substantial pent-up buyer demand; it appears that most of the buyer demand is being driven by white-collar workers who are continuing to flee the cities for greener pastures and more bang for their buck.
Days on market continues to remain about 10-14 days before the home goes into contract regardless of where the property is in the region. With open houses still on hold, most agents are bringing homes on the market on a Friday and calling for offers by the middle of the next week. There isn’t a reason to have two weekends of open homes plus a brokers tour. This means that buyers and agents are going to have to act fast. Zillow, Redfin, and Realtor.com all have instant notifications. Use them as they are virtually updated in real time. This is likely faster than having your agent sit in front of a computer refreshing their MLS all day long. Also, the local MLS allows for Coming Soon properties that your agent can monitor. Use every trick you can to get into a property as quickly as you can.
Nevertheless, buyers are going to have to be paradoxically patient and aggressive at the same time. The time it takes to find a home and outbid others will likely lengthen beyond the 6 months it was prior to the pandemic. Also, assume that you will have to write multiple offers before you get into a property. Finally, I’m going to pass along advice given to me by one of the top real estate coaches in the country: don’t fall in love with a home until you’ve closed escrow.
I’ve had the opportunity to sit through several meetings with leaders in the real estate industry and no one thinks that the market is going to change dramatically before year’s end. Even with increased opportunities for the COVID vaccine, individuals’ plans are still tenuous and fluid. There are several tips and tricks that you can use to write a stronger offer, but be very wary of removing all contingencies.
In fact, this has been an ongoing topic of discussion in our office meetings. Several buyers’ agents are submitting offers without an appraisal or inspection contingency. For both buyers and sellers, this is extremely dangerous. As a buyer, in order to qualify for a loan a home must appraise or you have to make up the difference – in cash – to fulfill your obligation to purchase the home. With offers going significantly above market value, this puts the buyer in a precarious position. As a seller, if you don’t have adequate protection ensuring that a buyer will pay the difference in appraised value and purchase price, there is a potential that you will have to come down in price or that the deal may fall apart altogether. Make sure that you have this conversation with your agent upfront, rather than after going into contract.
This is still an extremely fast market. Most homes are going into contract within two weeks so, if you are getting ready to sell, make sure that you have a place to go, or negotiate a rent back to buy you some time after close of escrow. Since there are so many buyers waiving inspection contingencies, I would encourage you to have inspections done prior to putting your home on the market so that you know what may be wrong with the property. This can potentially head off any lawsuits that may arise because of disclosure concerns.
In addition, have the buyer include a cover sheet indicating that they have read through the reports and disclosures along with their offer. This way, you will have some added protection in case something comes up during their inspection period. Waiving the inspection contingency is not the same thing as waiving the right to inspect the property. According to the RPA, the buyer still has a right to inspect the property for 17 days even if they’ve waived the right to back out because of something that comes up.
One last thing to consider: if you live in a subdivision that has an HOA, order those documents as early as possible (it generally costs around $500). HOA documents are notoriously difficult to get in a timely manner and you want to make sure that if there are any CCRs that are unacceptable to the buyer, they know this prior to writing an offer rather than two or three days before close.
Whether you are a buyer or a seller, this is an extremely challenging market; however, it can be navigated with the right agent. If you don’t have an agent and would like to learn more, contact me to get the conversation started. I’d be honored to help you with your real estate dreams.