Happy April!
As I write this, it is a crisp 55º in the middle of the afternoon and the sun is trying to peek through the clouds. We definitely had a true winter season and I am ready for what spring has in store. Over the last month, I have helped a few clients purchase homes and in one of the cases, the process started 2 years ago. I mention this to say that the mindset for many buyers is there is no urgency to simply buy a house, it has to be the right house. At the same time, I am seeing homeowners stay in their properties longer, so when looking in many of the sought after areas, active inventory is very low. Two examples:
In the Redwood Heights neighborhood of Oakland the average homeowner stays in their property 16.71 years.
In the Thousand Oaks neighborhood of Berkeley the average length of time is 17.77 years.*
Here is data from 6 broad areas in Oakland and Berkeley and how they performed the first quarter of 2023:
I’ve also noticed that non-contingent offers are back, even in the townhouse market. I have called on many pending deals in both Oakland and Berkeley and have learned that the winning offer and often the top tier offers are non-contingent.
If you write a non-contingent offer, you are:
Waiving your inspection contingency: You are making your offer to take on the property condition: relying on the reports and disclosures that the seller provided, accepting all of the information in the natural hazard and preliminary title reports. Your offer is not contingent upon insurability, the reason this is important to note is some areas in very high-risk fire zones have high insurance rates, I suggest getting a quote before you write. You have done your due diligence and are comfortable with the neighborhood, schools and have checked crime maps and the Megan's Law Database.
Waiving your appraisal contingency: You are buying the house at the offer price EVEN if the property appraises for less. This means that if it appraises for less than you offer you need to cover the appraisal shortfall. If you are getting a loan with 20% down, the lender will loan you 80% of the appraised value. So if a property you are in contract on appraises for less than your offer price, you will need to have the cash to cover the delta between the your offer price and appraised value.
Waiving your loan contingency: You need to have confidence in your ability to secure a loan and close and your offer is not contingent upon securing a loan.
Note that if you write a non-contingent offer and do not close for any reason, your initial deposit is at risk. In our niche market that initial deposit is 3% of the offer price.
While I have written many non-contingent offers, my clients only do so when they fully understand the risk associated with that type of offer and we have a plan A and plan B in place. This is not to say that buyers are not nervous writing a non-contingent offer, but it is always their choice to do so. Working with a local and veteran mortgage lender can minimize some of the risk, because many of the local mortgage brokers have a preferred panel of appraisers that only work in the specific areas that they are experts in.
In our marketplace, no agent is powerful enough to change a market, but the value in great agency is always getting honest updates, intel and insight into the market in real time, and feedback with supporting data.
Here’s to a beautiful spring – go out and enjoy a superbloom! – and don’t hesitate to reach out with your real estate questions and needs, I’m always here for you.
*Data sourced from Chicago Title Montclair
