What do gas prices and inflation rates have to do with the seller's market or buying or selling right now in today's real estate market?
Well, think about it. I mean, just this weekend, we went to the gas station, and gas was over $6. I mean, $6 for gas, which you think is a lot of money, but what if you compare it to a Starbucks coffee? A gallon of Starbucks coffee would probably cost around $200. My point is that right now there's a lot going on in the world. Prices of everything are going up right now, and the real estate market is no different. We need to understand that home prices are going up relative to gas prices.
Right now, any time we list a house, the prices are just insane. In fact, I just wrote an offer for one of my daughters. We ended up getting the house, and we spent a significant amount. I mean, we're talking like $170,000 over what the house was listed for, and it was over $1,000 per square foot. It's because of what's happening. It's supply and demand.
And here's the deal. With that, you have to educate the seller and the buyer. I hear agents complaining about buyers, saying things like “I wrote 18 offers for a buyer, and then they backed out, and they went to rent a house.” And let me tell you. That is your fault. It is absolutely your fault that the buyer did that. Because you have to educate your buyer of exactly what is happening right now in the world.
Now, listen to me. I love helping buyers. Really I want to help them. I want to be there and hold their hand and gets their offer accepted. Even when competing with 57 other ones, and you're an FHA buyer with no money down. I'm going to fight for you to fight against those cash offers that are $200,000 over list price, removing all their contingencies. The bottom line is in most cases, you are not going to win.
Now, there are very rare occasions that somebody might want to just do the right thing and help a first-time home buyer or help a veteran. I know I love doing that. But in most cases, in all reality, money talks and so does safety and security. So when you are comparing a cash offer $200,000 above list price with no contingencies to an FHA buyer or a VA buyer, there is a lot of risk that can happen there.
So here's how you make it so you are not going crazy and the buyers aren't going crazy. You educate them. How? Well, if you've got a buyer and their maximum purchase price is $500,000, what do you need to do? First of all, don't start looking at prices that are $500,000 or even $475,000. You need to go into any given neighborhood and you need to look at what houses are being listed at and what they're actually selling for and what terms are happening. What do offers look like? Are they removing contingency? Are there any contingencies at all? How large is their deposit? How much did it go over? If you know that houses that are listed at 400,000 are selling for 470,000, right, and you're only approved for 470,000, then you need to be looking in the 400,000 price range.
So educate yourself in the real estate market, just like gas. I know that right now, when I go to the gas station, especially over the next couple of months, because of what's happening right now in the world and with all the uncertainty, inflation is happening, prices keep going up, and I'm going to expect when I go to the gas station that I'm going to be paying a lot of money for gas, so I'm going to kind of change the way I'm doing things. In fact, my husband was just saying. He's like, “Okay, now when I know I'm working on a project and I know I need to go to Home Depot…” before, I swear to you, he'd go to Home Depot five times. I'm like, “Babe, why'd you go to Home Depot five times a day?” “Well, I forgot this, and I forgot that.”
I'm like, “Write stuff down. Be more prepared. We're changing the way we're doing things.” He said, “I'm going to Home Depot today. I'm literally thinking of what I'm going to need, what might come up, what might arise, and I'm going to buy the stuff that I think might come up or might arise, based upon knowing the fact that it's $6 a gallon for gas right now, and I don't want to go back and forth because I know every time I drive there, it's costing me 15, $17.”
Okay? It's the same thing in real estate. We need to understand that because of limited inventory, there is not a lot of supply. And guess what? That does not look like it's going to change any time soon. The real estate market, in my opinion, for the next several years is going to be crazy. It's going to be a seller's market, even with everything that we have going on in the world. Now, of course, if World War III happens, God only knows what's going to happen then. But the point is is that it expects for this to be this way for a while.
If your buyers are not qualified and not willing to do what it takes to buy a home, then don't work with them. Educate your seller, as far as what's going to happen, what they can expect, how it's going to be a complete frenzy when they list, the things that you can do to mitigate and to make it so it's not so crazy. And what can you do? You can have certain showing times. You can make sure that anybody that's goes into the home, they send you a TBD letter or a desktop underwritten letter, or if they're a cash offer, before they even go into the property, they actually show you that they've got the funds to pay for it.
Don't just let anybody and everybody go in. You need to say, “Hey, if you're qualified for 400,000, it looks most like houses in this price, when you're selling for around here, I highly recommend that… here's what the seller's looking for. The seller's looking for a 59-day rent back. They're looking for no contingencies. They're looking for boom, boom, boom, boom, boom. This is the kind of offer the seller's going to take. If you're not willing to do that, you might not want to waste your time.”
Now, that might sound really mean and really rude. But all reality, people, is that's reality right now. That's what's happening. So don't waste your time, don't waste the buyer's time and don't waste the seller's time or have any extra people or people or foot traffic going through their house. Education is key right now. Let people know exactly what is happening and let them know that because of what's happening in the world and because of the low supply and the low building, they're not building enough houses to be able to take care of the amount of population. Population is growing. Homes are being built less. So there's a huge gap, and it continues to get bigger and bigger, which means that we're probably going to continue to have bidding wars.
So just like gas prices are not fun, we expect it as long as you expect and educate your sellers and your buyers as to what's happening in the real estate market and what's going on, you're going to save yourself a lot of time and inconvenience.
