Long Island’s housing market is scorching hot, posing challenges to hopeful buyers driven by low interest rates but stymied by a limited supply of homes.
To help homebuyers navigate the potential pitfalls of buying in this market, Newsday Live hosted a question and answer session Tuesday with local housing experts as part of its web series Hot Tips for a Hot Market.
The virtual session, moderated by Newsday anchor Faith Jesse and residential real estate reporter Maura McDermott, included Al Fazio, a real estate attorney at Capuder Fazio Giacoia in Manhattan, and Michael Grannum, real estate salesperson with Exit Realty Premier in Massapequa.
Responses have been edited for length and clarity.
How long can this hot housing market last?
Grannum: This market is probably going to stay hot until at least the fall because there are two situations happening at the same time: You’ve got low interest rates and the inventory is extremely thin. There are just not that many homes coming onto the market.
What do you say to homebuyers who are considering going into contract on a home without having it inspected first?
Fazio: The market today is such that buyers are so anxious to get their offers accepted that they’re willing to do things that, from a legal point of view, can get them into some trouble. We encourage clients to think long and hard before waiving the inspections. Timing is an issue, yes, but if you contact your home inspector and engineer prior to making offers, at least you have someone at the ready. Once you put pen to paper and say that you’re signing that contract, you’re taking the property as is.
In some cases, buyers are willing to go to contract without contractual safeguards like mortgage and appraisal contingencies. What is the risk there?
Fazio: There are several contingencies in a standard contract. The buyers need to be aware that by saying, "I’ll waive the mortgage or appraisal contingency," they may put themselves in a tough spot if they aren’t approved for the financing they’re seeking. If you’ve waived that provision, you are telling the seller you will pay the difference from your own funds. If you don’t have your own funds, you’ve effectively defaulted under the contract. If the buyer defaults and can’t close, at that point they could forfeit their deposit.
Some buyers have resorted to sending "love letters" to sellers, telling them how much they or their family would be a good fit for the property. Is this a good idea?
Grannum: I advise my clients not to do that. When you have one client or one buyer putting in a letter like that, to some degree it could be seen as an unfair advantage. We want to make sure that we present all offers in a fair and accurate way. And sellers should focus on the financial offer, the complete offer package, not the person making the offer.
How can buyers get a feel for when a bidding war is getting out of control, and when should they step away?
Grannum: If a client is looking at these homes and is going to put in an offer, I give them a good idea of the max we should go to. There’s a risk for sellers who accept offers way above asking, as well as buyers who bid too high. I’m seeing a lot of homes coming back on the market, and it’s very possible the offers were too high, exceeded the appraised value, and now the property is back on the market. You have to be very careful about that.