Berks County’s housing market ‘not for the faint of heart’

(Originally published Aug. 9, 2020 for the Reading Eagle) — Matt O’Blosser and Siobhan Groft’s Muhlenberg Township home was officially listed for sale the morning of Aug. 7.

By Aug. 9, the house will almost certainly be under contract. The engaged couple already had multiple offers by Friday night with a dozen showings scheduled, a parade in and out of the house.

The blistering speed at which the Berks County real estate market moves is getting faster. A year ago, real estate agents said that if a home is on the market longer than three days, it’s probably priced too high.

The difference in 2020 is not only could the home be priced too high and still sell immediately, it could also spark a bidding war. The environment is extremely competitive and sellers can make a mint.

“Price point really does not matter,” said Daryl Tillman, who with his wife, Lisa, launched Daryl Tillman Realty Group in April.

They estimate more than 75% of homes on the market right now receive multiple offers.

“If something is put on the market and it is a very crisp and well-maintained property, there will be more than one person interested,” he said. “You’ll see a large amount of showings, then within 48 or 72 hours, sometimes even 24 hours, the home will be under contract — more than likely above asking, with no seller assist.”

That’s only the tip of the iceberg.

Buyers are pulling out all the stops, in many cases paying tens of thousands of dollars over list, using escalation clauses that can drive the price up, waiving property inspections, even penning personal letters to appeal to sellers’ sentiments.

The root causes remain the same: low interest rates and very low inventory. Berks has long been a desirable place to live due to its combination of affordable property, diverse job market and proximity to other major metropolitan areas.

Since the COVID-19 shutdown was lifted for the industry in May though, those problems have only been exacerbated by pent-up demand, even lower rates and declining inventory.

“Once we opened back up, it was like opening up the floodgates,” said Hilary Notario, a Realtor with RE/MAX of Reading.

“What I’m telling clients is, ‘I’m not pushing you — however, if this is your dream home, then we need to react.’ “

As anybody who’s been through the process can attest, the first few houses inevitably get away from many buyers, caught off guard by the great lengths the competition is going to secure a winning bid.

There are many buyers who have not been able to do what they want: move.

Raise, re-raise, all in

O’Blosser and Groft are experiencing the market from both vantage points.

They’re selling their property — a well-appointed, newer-style home with updated interior in a sprawling cul-de-sac — because they reached an agreement on their “forever home” a few weeks ago.

The rural Bern Township location has plenty of room for their 5-year-old daughter, Mallory, to play and have friends over, while the couple preferred the Schuylkill Valley School District. There’s also an in-ground pool and hot tub, more storage space and room to park O’Blosser’s boat.

But after losing out on three other homes, O’Blosser and Groft wound up agreeing to pay $30,000 more than the original $380,000 asking price.

Even that required fending off an offer $30,000 above their own.

“There ended up being 21 showings in 12 hours and six offers,” Groft said. “It was only on the market one or two days, so you pretty much need to get in it the same day to have a chance.

“We got a 15-minute window the same evening. That’s all that was left. We put our offer in that night, and by the next morning, they said they wanted best and final by 6 o’clock, so we tweaked our offer.”

Tweaking it meant waiving most inspections and adding an escalation clause that would increase their offer by up to $30,000 as higher proposals came in. It’s like a re-raise in a poker game.

Groft also wrote the sellers a letter explaining why they were so interested in the home, which may have contributed to beating out a competing offer.

“I believe it definitely helped,” Groft said. “We got feedback from our Realtor that said they loved the letter and wanted to make sure the house was going to a good family.”

Outrageous as it might be, O’Blosser and Groft had already come up short multiple times since their search became serious in May. They weren’t about to let this place slip through their hands.

“We went and looked at three other houses in the Leesport area, and within two days, they all had offers and were gone,” said O’Blosser.

It’s a familiar tale regardless of budget.

No assists

High school sweethearts Brooke Schaeffer and Luis Leon are first-time buyers, each at 22 years old, having just completed their transaction in July. They were looking for something affordable in the Temple area. Schaeffer wanting a move-in-ready home, Leon with his heart set on a garage.

The couple is plenty informed despite their young age. Yet, as deal after deal fell apart, it was beginning to feel like one or both of them might not get what they wanted.

“We found an end unit we really liked, but someone wound up outbidding us,” Schaeffer said.

Actually, the dollar amounts were similar, but the competing bid did not include seller assist, once a popular program for first-time buyers especially, now a drag on most offers.

“When the offers are the same, the seller is going to take the one without the assist,” Schaeffer said. “We just felt as first-time buyers, we didn’t want to let go of the assist.”

Another seller backed out of an agreement, leaving Schaeffer and Leon to weigh their options. Even an attempt to settle for something they weren’t thrilled with went awry once competing offers started flooding in.

“We were, not frustrated, but to the point where we didn’t want to get our hopes up,” said Schaeffer. “It was just, do we take a break? Something will come our way.

“We saw another house, a little less than our price range, very cute on the inside, but we didn’t know if we could get a garage in there. It wasn’t something we both loved. But by the next day, it was listed for $139,000, and the highest offer was $160,000. We know the home is not worth that much and doesn’t have everything we were looking for.

“Then Louie actually found a house, pretty spacious, more of an older home needing a little more fixing up. It wasn’t exactly my preference, but we’re doing this together. I wanted to give him a chance to get what he wants.”

Luckily, Schaeffer and Leon found the best of both worlds after being tipped off to a home that hadn’t yet hit the market. They were able to secure a private showing and wrote a letter to the owners, who agreed to accept their offer without ever formally listing the property for sale.

Not everybody will be so fortunate in their first-time buying experience.

And in those price ranges, buyers are often competing against investors, too, while superior offers aren’t always strictly bigger dollar amounts, but the ones that waive conditions and bring more cash up front.

“It’s probably a very tough market for first-time buyers, not getting seller assist, needing up-front money,” said O’Blosser. “We had to put a good chunk down.

“As first-time home owners, we would have never been able to compete in this market.”

Deep pockets wins

The reality is no matter how much you love a home, there’s a chance it simply isn’t meant to be.

Some buyers are placing bids on homes for way above what the properties can appraise for, which means paying the difference the bank won’t finance — possibly tens of thousands of dollars. A surprising number are even paying for whole houses in cash.

“That is a game changer,” said Notario, who says she’s done three such deals since the real estate business resumed in May. “You may get a lower offer with cash, but now you don’t have to deal with an appraiser or repairs.”

Notario recalled one buyer who purchased a home sight unseen, having only driven by the exterior on his motorcycle, and still waived all but a septic inspection.

Waiving inspections is not a strategy Realtors universally recommend, though they acknowledge it does enhance offers, as do quick turnarounds on settlement dates.

Using a local lender is also viewed as a top recommendation.

“It’s not necessarily about the price,” said Notario. “It’s the contingencies: strong lender, large escrow deposit down and basically waiving inspections.”

‘Not for faint of heart’

Buyers say having an experienced, responsive real estate agent they trusted facilitated their deals.

“You have to be really creative,” Tillman said. “It’s not always the bottom line numbers. It’s not always net. In many cases, it’s about the lender or agent. A local lender versus an online lender might get an edge.

“The majority of the time it comes down to the lender.”

Both Notario and Tillman stress they are educators, not salespeople.

“We do our best to explain this market is not for the faint of heart,” Tillman said. “I encourage people to really consider the reason they’re buying right now.”

Because while the buying frenzy is undeniably good for business, the warning to homebuyers who get caught in bidding wars is they might be at risk of putting themselves in difficult situations down the line.

“My real big concern as a real estate professional and just as a human being is some of these people are going to be in bad shape in a few years,” Tillman said.

“These prices continue to move where, at some point, the bubble is going to burst and we’re going to have a decrease in value significantly.”