Boulder County Real Estate Market Update Part 2
In the previous article we discussed how green the grass is for a home seller in the Boulder real estate market. That is because there is such an increase in the number of people moving to our area and not a lot of homes for the new residents to purchase, which is driving up the prices while decreasing the amount of time it takes to sell a property throughout our county.
All of this seems great if you are already a homeowner in this market! However, if you are on the other side of the fence trying to buy a home, the grass isn’t so green. In the previous article I promised that I would tell you about a couple who is moving to Colorado for a job in South Boulder. This couple hopes to purchase their first home so that they can establish themselves in Boulder County and start a family. This home purchase will be their first ever, so you can imagine how excited they are. Throughout the years they have been excellent savers and have close to $200,000 cash in the bank to put down on a new home. That downpayment is well more than 20% for most homes that they would consider. It is more likely 30-50% of most homes they would hope to buy. As you can see, this couple have been excellent savers and should be very proud indeed of their accomplishment.
The homes this couple are looking for would be close to South Boulder to minimize commute time and be green about getting to the office. The couple would prefer a smaller home that is also energy efficient for cost savings as well as being environmentally conscious. They realize that inventory is low and competition is high so they would also consider the neighboring communities of Lafayette and Louisville in addition to many areas within the City of Boulder. However, there is nothing on the market for them to buy!
This couple has been looking since December at anything that is listed for sale. We have written multiple offers for the couple which are optimized to both make their offer attractive, while also protecting their interests. Of course that means going above ask price; sometimes by tens of thousands of dollars. In addition, they are willing to waive the appraisal, but they are hoping not to waive the inspection as well.
Waiving the appraisal means that the Buyers are willing to come to the table with the difference between contract price and appraised value. This is happening because prices are escalating so quickly in our market and appraised value cannot keep up with demand. In addition, many buyers are coming to the transaction with cash to purchase homes, which does not require an appraisal. Buyers with loans are unlike cash buyers, because lenders can only allow buyers to borrow appraised value. This leaves the buyers paying with cash to cover the difference. That is only something that a good saver like this couple is able to do, and you can imagine how it makes them feel after all the time it took to save that money and now it’s up for grabs. If the buyers were typical first time home buyers they would not have such a large down payment and would not be able to come with this difference, causing them to lose immediately in the bidding process.
However, appraisals are not the only thing being waived by buyers in the contract process. This market is causing buyers to also waive their inspections. That means that the buyers are not going to inspect the home at all. This says that they will buy the home without any inspection no matter what problems the home might have. This is such a risky move that I cannot advise buyers who I represent to take this step. It makes me wonder what would happen if the buyers moved into the home without any idea about the health and safety of the home’s structure and mechanicals. What if something tragic happens; like they find that the foundation is compromised, the sewer line is collapsed and the furnace is leaking gas? Who would the Buyers sue? Probably their REALTOR who advised them to waive this condition. It’s a terribly unwise practice that I’m seeing used throughout Boulder and the Front Range when competing for homes in this limited inventory market.
For the Buyers that I’m representing who have 30-50% downpayment, they have been making bids on homes, going over ask price, waiving appraisals, making ‘as is’ inspection clauses (which still allow them to inspect) and offering to pay for the title insurance and closing costs. Offer after offer, and they are still waiting to ‘win’ their new home. To them, it feels like they are bidding on Ebay for their first time home purchase, which is a less than satisfying way to be a first time home buyer.
So now we can see why the grass isn’t always green in this market. In the next series we will talk about why we are seeing this lack of inventory, which is the source of the competitive nature in this real estate environment.
Click to learn read Part 1 of the Boulder County Real Estate Market Update.
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