We’re in the discouraging time of the real estate year, as buyer’s agents. April and May are the peak months for competition among buyers for properties for sale. In other words, bidding war season. There are bidding wars all year, but more so in the spring.
As properties are coming onto the market (which began just after Easter/Passover weekend), our agents are getting Offers to Purchase accepted again. Hurray! Cue the dance video! This is encouraging; however, we are not forgetting that we are in the hard part of the market for buyers.
Can you buy?
The Boston Globe published an article about Gen Z adults. It included a calculator to determine how long it would take them to get out of debt and into the real estate market. Try it.
Millennials were asked the same question four years ago. Millennials despaired that home ownership was out of their reach. Four years ago, slightly more Boston-area millennials thought they’d always rent than the national average. Since then, housing prices have increased, and wages have not kept up.
Millennials are a buying force, nationwide. Millennials still make up a lower percentage of buyers here than they do nationwide. Why? Because it is too expensive here. When surveyed, the Boston area frequently shows up in the top ten choices of location for Millennials.
What goes for Millennials goes for Gen Zs. Is it impossible for Gen Z buyers? Yes, for some. No for others.
Reasons not to give up
Despair is reasonable, but it also is not. The calculator assumes that the Gen Z buyers have no family wealth that can be tapped. That has not been our experience. Some of our buyers have purchased on the power of their own incomes; however, most buyers have had an economic boost due to family wealth.
People with family wealth behind them — in the form of better education, higher education with lower student debt, or down payment assistance from family wealth – have an advantage in those bidding wars that we see in April and May. That makes Spring a harder time for people trying to break into the housing market on their own income and wealth. The calculator does not account for that boost that some have.
The wealth gap that was created by segregation in America continues into the next generation. When family wealth from housing price appreciation is shared to young adult members, it pole-vaults those wealth recipients into the housing market. Sometimes this is inherited wealth, and sometimes it is gifting. Not all white Americans have family wealth or relatives that share it. Even more non-white people do not have family wealth to share. The racial wealth gap is still with us. We hate the ongoing unfairness. We see it in our business.
If you are buying:
No matter what market conditions are in play, sellers will:
- First and foremost — they will seek the highest price for their property. Can you blame them?
- Second, they won’t sign an Offer to Purchase unless the buyer can prove that they will reliably have money on closing day to close on time.
- When there are two (or more) Offer to Purchases around the same price, the sellers will then look at the terms of each Offer to Purchase. The terms are conditions where the buyer has rights before closing. Standard terms are:
- Mortgage contingency clause. This is a paragraph included in the Offer to Purchase and the Purchase and Sales Agreement stating the if the buyer applies for a mortgage and fails to get it by a specific date, the buyer will get their deposits back. Without that clause, the seller can withhold deposit, which is 5-10% of the purchase price.
- Inspection clause. This paragraph gives the buyer the right to withdraw from the purchase if a professional home inspector finds structural or mechanical problems with the property. A specific date and a specific minimum cost to repair are included in this paragraph. Usually, the inspections are done within 3-5 days. The limit may be as little as $1000 or as high as $20,000, depending on the property.
Don’t let anyone tell you that you must waive your right to mortgage contingency or inspection in order to purchase a house or condo in the Boston area. It is simply not true.
All our clients have mortgage contingencies, unless they have proof of funds to close without a mortgage. All our clients have home inspections before they sign a Purchase and Sales Agreement.
In the spring, buyers are pressured more about waiving their rights. We hate it! And you don’t have to do it to buy a home.
Leave A Comment