Business is booming for Outer banks real estate, but how long will it last?
On April 7th, 2021, the Outer Banks Association of Realtors released the March 2021 MLS Statistical Report. The total monthly real estate sales on the Outer Banks were up 86%. Residential sales increased by 87% and had a median sale price increase of 37%. Lot and land sales were also up by 74%, with a median sale price increase of 43%.
So, what does this data mean? For lack of a better term, the real estate market in the Outer Banks is booming. People are purchasing vacant land and residential properties at astronomical rates, and at much higher prices than in the past.
There is a drawback to this, however. Inventory on the Outer Banks is currently incredibly low. The total inventory of real estate on the Outer Banks was down 55% in March compared to 50% for the month of February. Lot and land inventory was down 26%, and residential inventory decreased by a staggering 72%.
As hot as things have been, there are concerns about how long the current level of real estate activity can continue. The inventory of properties coming on the market is not keeping pace with sales.
Currently, the median amount of time a property is listed on the market is roughly 16 days. In other words, properties are selling extremely fast. In the month of March, about 46 properties wound up under contract in less than one day.
Therefore, because the Outer Banks has experienced such a large decrease in residential housing inventory while demand remains high, both buyers and agents will suffer at the hands of this super seller’s market if they are not adequately prepared.
However, there are some things buyers and agents alike can do to simplify the process of purchasing real estate on the Outer Banks in the current market climate, such as:
Having all pre-qualification documents ready to go
Some sellers on the Outer Banks won’t even allow potential buyers to view the property if they lack pre-qualification documents. Having documentation such as your proof of funds if you are offering cash and/or a pre-qualification letter if you are borrowing is essential.
Considering the listing price as the starting point
In a super seller’s market, like the one the Outer Banks is experiencing, adequately priced properties typically receive multiple offers and can wind up triggering bidding wars. Because the seller is often likely to consider only the highest, cleanest offers, buyers should consider the listing price as the starting point and aim to bid slightly above the listed price to give them a leg up against their competition.
Looking for properties priced 10%–20% under your budget
This point goes hand-in-hand with considering the listing price as the starting point. If you are not prepared to offer over the listing price due to budget constraints, a good rule of thumb is to look for properties priced 10%–20% under your budget. This will give you extra room to offer above the listing price (and stay a solid contender in the case of a bidding war) all while staying within your ideal budget.
Waiving the due diligence period
Electing to waive the due diligence period means you are forgoing the right to terminate the contract prior to the due diligence deadline and be guaranteed to receive your earnest money deposit back. This is the least desirable option for the buyer but would be very attractive for a seller.
The due diligence period is specifically the time allotted to the buyer to complete all inspections, arrange financing and negotiate with the seller for any needed repairs.
As risky as it may be, waiving the due diligence period confirms to the seller that the buyer is buying the property “as is,” thus making that offer more attractive to the seller. A better alternative would be to make a more sizable due diligence fee to the seller.
Consider offering a due diligence fee
A due diligence fee is a sum paid directly to the seller once an offer is accepted. This fee is non-refundable if the buyer terminates the contract but acts as extra earnest money should the buyer go through with the purchase of the property. Prior to the end of the due diligence period, the buyer has the option to terminate the contract under any circumstances. If a buyer terminates the contract during the due diligence period, the buyer will receive their earnest money deposit back but not the due diligence fee. Due diligence fees in our market have ranged from $500 to $10,000. It is recommended to seriously consider the condition of the property and the buyer’s commitment to purchasing that particular property before offering a substantial due diligence fee.
While not required, including a sizeable due diligence fee in your contract offer can make you more attractive to sellers, as it shows how serious you are about the property and gives them confidence in you as the buyer.
There is no telling what exactly will happen with the Outer Banks’ real estate market, but it is very clear that the inventory of homes cannot keep up with the number of potential buyers in the area presently. At the high rate that homes are selling and the incredibly low rate of new homes coming onto the market, it won’t be long before the Outer Banks runs the risk of having next to no housing inventory.
Therefore, if you are one of the many potential buyers vying for real estate in the Outer Banks, it is absolutely essential to understand the challenges of the present market climate and to be prepared to go the extra mile to secure your home. Working with an experienced Realtor who can help you navigate the negotiation process is critical and having your financing pre-qualified can give you a competitive edge.
TATE FELTS • Loan Officer | NMLS#117311
Office 252-389-9427 | Mobile 252-207-8283
2600 N. Croatan Highway Suite 100 | Kill Devil Hills, NC 27948
Data Source: The Outer Banks Association of Realtors/March 2021 MLS Statistical Report