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Buying a Home in the Crazy Vermont Real Estate Market

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For a variety of reasons, housing prices rose 9% in 2021 and are expected to go up another 10% in 2022, according to a report from the Vermont Department of Finance and Management. Pick your adjective for the Vermont housing market: hot, crazy, competitive, expensive, or all the above.

If you’re looking to buy a house, don’t despair. As a mortgage originator at VSECU, I have a front-row seat to the home-buying process and how buyers are navigating residential real estate in Vermont. From my perspective, here are several ways that you can increase your chances of finding your next home.

 

TALK TO A MORTGAGE ORIGINATOR AND GET PREQUALIFIED

Before you start your search, reach out to your local credit union or bank and see what kind of mortgage you qualify for. By getting prequalified, you’ll know roughly how much your mortgage will be. With these figures, you can more accurately calculate your budget and make sure you’re looking at homes you can afford. If you end up putting in an offer and going into contract, it will also help expedite the process of securing your mortgage.

 

HIRE A REAL ESTATE AGENT

There are several benefits to working with a real estate agent in a crazy housing market:

  • You’ll have access to MLS (multiple listing services). For sellers working with a real estate agent, this is where almost all homes for sale are listed and one of your most comprehensive sources for seeing what’s on the market. Your agent can enter your preferences—location, number of bedrooms and bathrooms, etc.— to flag new listings for you as soon as they hit the market.
  • They know the housing market and their expertise will help you find the right home without over-paying. They’re tracking sales to know how homes are being valued. When you’re ready to make an offer on a house, they can look at comparable sales—how similar homes have sold—to help you make an informed decision.
  • They have gone through the home-buying process with many other clients. They’ll guide you through your search, help you create a competitive offer, and negotiate on your behalf to get the best price and terms for you. Since they’re familiar with the process, you’ll be able to move through the home-buying steps that much faster. And in a competitive market, time can be of the essence!
  • You may not have to pay for their services! Typically, the seller pays the broker’s fee (both seller’s and buyer’s) out of the sale price. However, some sellers may insist that you pay the fee, which will get lumped into the final sale price.

Ask around for recommendations from family, friends, coworkers, or neighbors. Your credit union or bank might also be able to give you a list of suggested real estate agents to contact.

 

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KEEP AN EYE OUT FOR FSBO LISTINGS

FSBO stands for “for sale by owner.” You’ll typically see these on Craigslist, Front Porch Forum, or lawn signs. Why look for FSBO in particular?

  • You might have less competition. Because they’re not represented by a real estate agent, FSBO houses don’t appear on MLS and are harder to find. That means fewer showings and fewer offers that can drive the price up.
  • Not only might you have fewer competing offers, but the asking price might start lower, too. Again, with no real estate agent on their side, FSBO sellers may not have a complete sense of the current market. You might benefit by closing for a below-market price.

I don’t recommend that you do this without a real estate agent, however. Their expertise will be incredibly valuable for making an offer (or not) and negotiating the contract. And as I mentioned above, you very well might not have to pay their fee!

 

WAIVE THE INSPECTION?

One common contingency in any offer is the home inspection. The inspection helps uncover potential issues with the house—structural, electrical, plumbing, heating, etc. Based on the inspection report, you can negotiate with the sellers to resolve these issues before the sale, typically focused on matters of safety. If the two sides can’t reach an agreement to fix the issues or negotiate the price, you can get out of your contract to buy the house.

Because of this, the inspection is seen as a speed bump. It’s an opportunity for you, the buyer, to change the terms or walk away entirely. That’s not ideal for a seller who just wants to close the deal as easily as possible.

In this hot housing market, we’re seeing more buyers waive the inspection and agree to buy the home as-is. Removing this contingency makes their offer more attractive because the seller doesn’t have to worry if the deal is going to fall apart because of the inspection.

You want to think carefully before you decide to waive the inspection, though. While it makes your offer more appealing, it also puts you on the hook for any repairs that are needed after closing. You might find yourself putting even more money into your new house, on top of the hundreds of thousands of dollars you paid for it. Can you afford any unexpected costs or consequences from skipping the inspection? Before you waive this contingency clause, make sure you understand the risks and are willing to take them on.

 

ADD AN ESCALATION CLAUSE?

If you want to buy a house that will have multiple offers, you can add an escalation clause. This will increase your offer to outbid other potential buyers by a certain amount until you hit your maximum offer. For example, you could make an initial offer of $270,000, with an escalation clause that you’ll go $2,000 above other offers, up to $300,000. If another buyer offered $290,000, your offer would automatically jump to $292,000.

While an escalation clause can help keep your offer competitive, it has its downsides. For one, sellers typically expect your best offer on the table in a competitive market. The seller will also know how high you’re willing to go, costing you leverage in negotiations. Even if there aren’t other offers to trigger the escalation clause, their agent can counteroffer at a higher price. Not knowing what other deals they could have on the table, you might agree to the higher price and pay more without needing to.

 

BE WILLING TO COMPROMISE

In a seller’s market, you might need to make a few compromises. But you don’t want to settle on a house, either. This can be a fine line to walk when you’ve seen dozens of houses and they either aren’t worth buying or your offers aren’t being accepted.

What are you willing to give up, if anything, to own your next home?

  • Could you expand your search radius to look in other locations?
  • Would you go for a fixer-upper?
  • How many bedrooms and bathrooms do you absolutely need?
  • Could you see yourself in various home styles, from ranch to Victorian to townhouse?
  • Could you live with a smaller yard, skip the pool, or go without a garage?

Think through your “must-haves” and “nice-to-haves” in advance. The longer your search goes, the more desperate you can be to make sacrifices to just buy a home. You want to be clear on what compromises you’ll make so you don’t have buyer’s remorse.

 

BE PATIENT

Patience is a virtue in general and in home buying. It only benefits you to wait for the right home and opportunity. You’re less likely to settle for a house that doesn’t work or feel right for you. You’re more likely to stay within budget and buy the home for its appraised value, rather than its market value.

Of course, this isn’t always possible. Your lease might be ending or you’re relocating for a new job. But if you don’t need to buy a home by a certain date, your emotional and financial wellbeing will be better off for it.

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