With demand up and inventory low, Denver buyers need cash
As inventory has scraped record lows, Denver showing windows have shrunk from an hour to 30 minutes, sometimes even 15 minutes! I am so shocked by what I see in the marketplace each day. It’s a wild market now.
Homes in the $400,000 to $600,000, in particular, are seeing out-of-this-world demand. I’ve seen multiple homes in this price range go on the market in recent weeks on a Friday and have all showing slots (30- or 15-minute windows) and booked up for the weekend within an hour two, with the seller and seller’s agent reviewing offers on Sunday morning.
The 1,120 Denver metro detached listings at the end of February represent a 65.01 percent drop from a year ago and an even steeper slide from 2019, according to the Denver Metro Association of Realtors March market report. This has brought the median days on market for these homes to five days, a drop of 72.2 percent from a year ago!
This has created a whirlwind buyer situation. I recently wrote an offer for a buyer client on a cute house on Delaware Street (just west of Denver’s Capitol Hill neighborhood). The house was listed at $550,000, we wrote an offer for $575,000 with a $20,000 appraisal gap waiver. It went under contract at $630,000 with an $80,000 appraisal gap waiver!
The size of this appraisal gap waiver relative to offer price is something you rarely if ever see at this price point. An $80,000 appraisal waiver is much more common for homes in the $1.4 million range. Another property I know of in the $500,000 range that went on the market recently received 52 offers!
Source: Denver Metro Association of Realtors March report (reflects February data).
With demand so high, and inventory so low, buyers need to come in as strong as possible with their offers, and, if possible, pursue one of the all-cash options now available to buyers who don’t actually have cash on hand.
The Denver all-cash buyer wave
Companies have begun offering new loan products to homebuyers that support them in making cash offers, but then they negotiate financing directly with the company that purchases the home or some variation of a cash-buyer arrangement. Some of the methods differ slightly, but the concept is the same: buyers now have new options to present as cash buyers.
One such company is Denver-based lender Accept.inc. The process involves applying for a loan with Accept.inc; upon approval, the lender provides a proof-of-funds, which functions as an all-cash offer. In fact, Accept.inc actually purchases the home on the behalf of buyers and then sold back to them immediately upon the close of the loan with Accept for the exact same price. Accept.inc charges no fees for this and says its mortgage rates are competitive. (Other companies are beginning to offer this option to buyers as well).
Screen shot from Accept.inc homepage.
With a deal like Accept.inc, buyers can make offers without financing or appraisal contingencies — this makes the offer much more appealing to sellers, because they know those two potential barriers to a close aren’t there.
(I don’t have a business relationship with Accept.inc — just including them as an example).
What to do as buyers
With this option, I advise my buyers for homes priced under $700,000 in this market now to figure out a solution to appear as cash buyers. The competition is just too fierce otherwise.
Absence the ability to appear as a cash buyer, buyers should shift their focus from detached homes to condos or townhomes, or begin looking farther afield from Denver city center.
Note to sellers
While it’s tempting to take all this buyer demand for granted, sellers need to still take the basic steps to ensure their home shows well. This means cleaning out cluttered homes and areas, often pre-moving in order to show the home well, and basic sprucing up, such as yard care, touch-up painting and more.
Reach out for some of my best suggestions that are easy to do for prepping your home for a sale.