How to be the best homebuyer in this competitive market
Michelle and Jack Gladstone in the Lindenhurst home they purchased after offering $81,000 over asking. Credit: Newsday / Steve Pfost
After looking at 40 houses, Michelle and Jack Gladstone took one glance at the line stretched around the block at the open house for the brick Cape in Lindenhurst and instantly understood what they were up against.
“We knew the way the market is, we’re going to have to be aggressive to buy, if it’s something we really wanted,” says Jack Gladstone, 61, a school bus driver.
The inventory of homes for sale nationwide hasn’t just declined, it has shrunk radically, as unusually low mortgage rates have unleashed insatiable consumer demand, according to Miller Samuel, a real estate appraisal firm serving the metropolitan area. That may change given rising mortgage rates, but it was no help to the Gladstones when they started their search in the fall of 2020.
“Bidding wars across Long Island account for more than half of all sales that have closed in the second half of 2021,” says Jonathan Miller, the company's president and CEO.
The real estate industry measures the pace of the market as “months of supply” — the number of months it would take to sell all inventory at the current rate of sales. For the fourth quarter of 2021, Douglas Elliman Long Island Sales reports the pace of the market was a record 1.4 months, 26.3% faster than the prior year and 60% faster than two years ago, Miller says.
In this super hot seller’s market, a buyer needs to adopt competitive measures to stand out from the pack and land a deal. Here, Long Island homebuyers and real estate agents share experiences and tips on how to snag a home in this atmosphere.
Michelle and Jack Gladstone at the Lindenhurst home they bought with the help of real estate agent Todd Solomon, left. In this market, buyers need to have "dangling carrots" to stand out from the crowd, Solomon says. Credit: Newsday / Steve Pfost
Understand the listing price
After being outbid on a few other houses, the Gladstones were ready to spring at the Lindenhurst open house in April 2021 and offered $81,000 over the $449,000 asking price.
“You can’t procrastinate in this kind of market,” says Jack, adding that the fact that they’d just sold their Franklin Square home and were able to give a $530,000 cash offer was also appealing to the seller.
Don’t focus too much on the listing price, advises Deepa Sachdev, an agent with EXIT Realty Achieve.
Many sellers put their houses on the market at a lower price than their actual market value. “So, $60,000 over the list price isn’t $60,000 overvalued,” Sachdev says.
A house that’s worth $600,000, she says, could be listed at $550,000. That lower price will "get people through the door and get multiple offer situations very quickly,” Sachdev says. “That’s how the seller is getting a higher price.”
That scenario also helps homes move faster, says Sachdev, who recently listed a home in Dix Hills for $789,000 that was appraised for and sold for $850,000.
Debra Schwarz and Robert Lombardo paid $10,000 over asking on their Holbrook home, which Lombardo only got to see on video before the couple made their offer. Credit: Morgan Campbell
Get preapproved
Many people first starting their search just show up at open houses, which is a mistake, says Melissa LoCurto, an agent with Douglas Elliman Real Estate.
“They end up falling in love with houses that they couldn’t possibly purchase," she says. “They have no idea what their purchasing power is.”
Beyond the sticker price, there are many other costs that factor into the price of a home, including interest rates, taxes, and insurance, notes LoCurto.
“I strongly suggest they get preapproved first, before they even start looking at a house. What the banks are willing to lend you is going to determine what houses you look at,” she says.
LoCurto recommends going to a mortgage broker who will have a wider array of loans to offer, will run a credit report and determine a potential buyer's debt-to-income ratio to see what mortgage they can actually afford.
Houses are moving so quickly that a house will most likely be sold by the time one gets papers in order.
“Buying a house right now is like a relay race,” says LoCurto. “You have to grab that baton and run to get to the next step.”
In this market, "you're basically taking the house 'as is,' " says real estate agent Nicole Perry, shown with client Franklin Foster at the North Baldwin ranch he recently bought. Credit: Howard Schnapp
Hire a buyer’s agent
LoCurto advises hiring a buyer’s agent who’ll be committed to not only finding you a house, but will recommend an attorney, a lender, get the home inspected, negotiate for you, and write up the offer.
Buyers do not pay fees to a buyer’s agent: The seller pays fees to both listing and buyers agents.
“The listing agent’s job is to get the seller the most amount of money in the shortest amount of time,” LoCurto says, adding that they negotiate exclusively for the seller.
To be more competitive with other buyers, some people forgo inspections completely, notes Todd Solomon, an agent with Douglas Elliman Real Estate.
“Most attorneys would frown upon it,” says Solomon. “Because at that point you really don’t know what you’re buying.” A house could have problems with termites or mold, or have mechanical or structural issues that typically would go undetected by the average buyer.
“You don’t know what you’re buying, and it’s probably the largest investment of your life,” says Solomon. “But, do people do it? Absolutely.”
Incentivize the seller
With each home getting 20 to 25 offers, buyers have to make their offers as attractive as possible, says Solomon, who found the Gladstones their Lindenhurst home. “I tell clients, ‘If you don’t have cash and you’re not going over asking, you got to put some extras out there.’”
Another motivator is putting a mortgage appraisal waiver in the contract, which means that if the bank appraises the house at less than the seller is asking, the buyer pays the difference in cash.
“In this marketplace you really need to have these dangling carrots that make you stand out from other buyers that are coming in with possibly all cash or higher down payments,” says Solomon.
Some incentives to consider: putting as much cash as possible toward the down payment; being flexible on the closing date; and ignoring any open or unresolved certificates of occupancy.
Any open certificates of occupany, such as an added bathroom or deck, if not addressed by the seller, would become the obligation of the buyer.
In some cases, sellers might not have been aware that they actually needed the COs, says Solomon. For instance, Nassau County requires one for central air conditioning.
Getting the CO requires filing an application with your municipality and paying a fee, and in doing so, could potentially increase the home’s property taxes, notes Solomon.
Real estate agent Deepa Sachdev, center, helped Debra Schwarz and Robert Lombardo find their Holbrook home. Credit: Morgan Campbell
Be ready to pounce
Robert Lombardo, 49, and Debra Schwarz, 46, both customer service reps for the IRS, had very specific needs for a home: it had to be in the Sachem North School District, have a full basement and be big enough to accommodate Schwarz’s three kids, her mom and a home office.
“We were looking for houses around $400,000 and were bidding $425,000 and getting outbid like crazy,” says Lombardo, who was Sachdev’s client.
They ended up closing on a Holbrook three-bedroom ranch with a converted garage in August 2021, for which they paid $425,000, $10,000 over the asking price.
Lombardo had been stuck at home quarantining and didn’t make it to the open house.
“I didn’t even see the house until the final walk-through on closing day,” he says. “Debbie walked through the house while I was on FaceTime and I told her, ‘You know what we need, you know what we want. It’s in the area we want, so if you want it, we’re going to buy it.’ ”
The couple were preapproved for a $425,000 mortgage, notes Lombardo.
“There’s no real bidding war: they do an open house over the weekend and on Monday they want your top and final offer.”
Franklin Foster, with real estate agent Nicole Perry, has already made upgrades to his home and plans to add a backyard pool. Credit: Howard Schnapp
Repairs, who cares?
Since moving into their new home, Lombardo and Schwartz repainted the entire house, fixed up the basement, and plan to do lots more work on the house — at their expense.
Before signing on the dotted line, a buyer should get an inspection with an engineer’s report, says Nicole Perry an agent with Our Community Realty.
“But you’re not going to ask the seller to make any repairs,” says Perry. “You’re basically taking the house ‘as is,’ ” Perry says. “But you still want to conduct an inspection so that you know what’s going on with the property.”
A client of Perry’s, Franklin Foster, paid $615,000 in February for a 1964 North Baldwin ranch that was listed for $550,000.
Foster, 49, the owner of a martial arts school who says he likes to fix up a home to suit his taste, gutted the basement, added windows and redid the kitchen. Next, he’ll focus on the backyard, where he expects to add a swimming pool.
“Your home is your home," says Foster. "It’s where you’re going to rest your head and you have to build it the way you want it.”
