People are moving… And they are moving to Arizona by the masses. With record-low mortgage rates pushing homebuilders to offer higher sales, the supply of existing homes is low throughout the state. Homebuyers have been using a lottery system to sell a limited supply of homes. These home builders and developers are experiencing long waitlists for their properties and are limiting the number of sales, simply because they don’t have the manpower, the materials, or the time to create enough housing.
The Arizona housing market is hot right now but it’s not like it was in 2003 and 2004. Buyers were investors and those investors weren’t living in the houses so a lot of these properties were rentals, which of course, when the subprime mortgage bust hit, these properties were the first to go.
But today, people are buying these homes to live in them, many of them from out of state. And there’s an extraordinary opportunity to get historically low mortgage rates right now so combine that with the need to get out of their own state or just for a more relaxing vacation home or even primary home, it’s a perfect storm for low inventory.
However, this also means that any interested homebuyers may have an equal opportunity to participate in selecting their home and their homesite, all the while keeping safe from the global pandemic.
So how does it work exactly?
Potential homebuyers are putting their name in a lottery to be chosen to buy the home. The name can be included with several dozen other homebuyers and it is drawn at random. But of course, the homebuyer still needs to be qualified to purchase the property and have upstanding finances. Some homebuilders are even prequalifying buyers by verifying that they can afford the home before being put into the lottery.
What does this say on existing sales or resale homes?
The demand for new homes is high but it doesn’t mean that existing homes or resale homes are going by the wayside. If a buyer doesn’t want to deal with the lottery or risk losing a home, one of the best options is to find a property that may have been on the market a little longer than necessary and strategically negotiate for a better sale. This may be the better way to go but again, for buyers that want a new, out-of-the-box home, the lottery system seems to be the best option.
Again, this seems to be only for new construction, however, homes that are priced correctly or even under market value may have multiple offers.
How to compete with a multiple offer.
For those that are not going for a brand-new home but instead are looking for a resale home, buyers may need to put in escalation clauses or offer above asking price. An escalation clause is the agreement to pay over asking price up to a certain amount in particular increments over the highest offer. For instance, if it’s a $300,000 house and a buyer submits an escalation clause they can offer technically up to $320,000 in $5000 increments over the highest offer. If another offer comes in at $310,000, the first buyer will pay $315,000.
All of this is negotiation and strategy and it really helps to have someone local that knows the market and how to negotiate on your side. When you’re ready to buy in Arizona, specifically in the San Tan Valley or Mesa area, contact my office at any time.