The first movie I saw in an actual movie theater was the 1968 film “2001, A Space Odyssey” (strange choice for a children’s movie, I know!) It was a fantastical representation of what the future might be, as viewed through the imaginative lens of Director Stanley Kubrick. I couldn’t help but think of the movie again in 2021, when our real estate reality felt like a real estate “space” odyssey of its own. Home prices and buyer demand skyrocketed past all realistic expectations in 2021.  And 2022 is yet another over the top year in the “SPACE” ODYSSEY that is our new real estate reality. There are more home buyers than there is inventory to sell to them, and home prices just continue to rise.

Given this home buying frenzy, sellers are in the driver seat. They can ask for exactly what they want from buyers.  And sometimes what they want seems far-fetched, and buyers comply because they want the house, and houses are in short supply. Thus, among agents, we kid that “the sellers demand the buyer’s first-born baby”.

But kidding aside, here are some of the major ODDITIES of the 2022 real estate “Space Odyssey”. All of these things would have been UNHEARD of prior to recent years. And as the market corrects, we will likely look back at these trends and wonder how they ever happened in the first place…. But they are the reality now, these oddities! Behold these trends, and wonder:

• Builders of new construction refusing to set a price for that new build UNTIL DELIVERY. Home prices and the price of building materials are rising so rapidly, builders are afraid that if they set a price NOW for future property delivery they will end up losing money (or at least not making as much money as they could make) and so are delaying pricing new construction until closer to the actual delivery date.
• NO due diligence. Typically buyers have a period of time in a real estate contract during which they can terminate for any reason or no reason at all. This is called the due diligence period, and in this time frame a buyer will usually have an inspection and ask for repairs. In this competitive market, many buyers are eliminating the due diligence period altogether and agreeing to not ask for any repairs. A risky proposition to be sure, but we see it very often in this market.
• Waiver of financing and appraisal contingencies. Cash is king in any market – an offer without financing and a buyer who shows enough cash to pay for a property is more likely to get to closing, so preferred by sellers. More often than ever, we are seeing buyers offer CASH and remove financing and appraisal contingencies altogether.
• Seller demands. The seller is in the drivers’ seat in this market, and they know it. So we are seeing sellers make demands of buyers that can seem quite unreasonable. Among them: long periods of seller possession after closing, often at no cost to the seller. A seller may demand the right remove certain items from the home that would typically be left with the home like favorite plantings, appliances, and the like.
• Increased earnest money. earnest money. In typical times, earnest money is equal to 1% of the purchase price. Therefore, for $1 million home, the earnest money at stake would be $10,000. But now, when buyers are trying to make their bids competitive with a slew of other buyers, one area and which buyers can make their offer stand out is in the amount of earnest money they put forward. Therefore, for that $1 million home we may see interest earnest money as high as $100,000 or even more. A

Of course, buyers do not have to agree to anything that they are uncomfortable with, and a good buyer’s agent will do everything that they can to try to protect the buyer and still get them the home that they want. For instance, instead of eliminating the due diligence period during which a buyer can terminate for any reason or no reason at all, a buyer might instead agree to a limited number; say, three days. Then the agent can help the buyer arrange to have all inspections, appraisals and the like completed during that three day period. 

What does all this mean for you? It’s a great time to sell if you are seller and thinking about moving sometime in the near future.  (Or if you have an investment property that you have been thinking of selling; now is a great time to cash out). But remember if you are selling your principal residence that it may be difficult for you to find a property to buy given the competition in the marketplace. If you are a buyer, make sure you have a great buyer’s agent who can protect you and guide you through these crazy times!