KALAMAZOO, MI — Katelynd Dreger and her boyfriend Craig Hotchkiss have spent the last month settling into their new home that they closed on in May.
Unlike many homebuyers, who have put in 10-plus offers before getting one accepted, the couple was fortunate enough to score on their third try, landing a three-bedroom, two-bath home just down the road from Hotchkiss’ uncle in Parchment.
The secret for their good fortune in landing a home so quickly? Finding one that wasn’t even listed.
Thanks to Hotchkiss’ uncle, who was out for an evening stroll in the neighborhood and got talking with the sellers, the couple was able to go straight to the negotiation table before the home was listed.
“We contacted the original owners of the house and then our Realtor came out and looked at the house with us and basically walked us through the whole process,” Dreger said. “It was a pretty simple negotiation. We put in our offer and didn’t have too much back and forth.”
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The months leading up to the purchase were anything but simple for Dreger and Hotchkiss, who in February entered into a six-month lease on a one-bedroom apartment in Sturgis where they are still paying rent.
While the couple achieved their goal of being in a new home no later than August when the lease came up for renewal, the ride got bumpy fast, Dreger said.
“It was a rollercoaster ride, much more than we expected it to be,” she said. “The houses were going so fast.
“When we first started, it was fun to start looking at the different houses, but it got a little difficult after a while. We would like a house and it would sell or we would see a listing and it would look great in the pictures but not so much in person.”
All in all, they only spent a little more than a month shopping for their home, much less than the average buyer in today’s market, said their real estate agent Colleen Lucas, with the Harrington Team at Five Star Real Estate.
Lucas said it’s not unusual for clients to put in offers on at least 10 homes before having an offer received. Oftentimes, it takes so long, she said, because a buyer may be up against two dozen offers on a home — which may go on the market on a Thursday and close offers Sunday evening or Monday morning.
Dreger, a teacher in Plainwell, and Hotchkiss, a chemical technician at Hammond Roto-Finish, found themselves competing with that high number of prospective buyers on their first go-round. They were bidding on a home in Kalamazoo’s Westwood neighborhood. Despite coming in at $15,000 over list price, they lost out to a cash offer that came in just before offers closed, Dreger said.
“We were told when we started we wouldn’t go any lower than $15,000 over with the way the market is,” she said. “And being on a tight budget, with a max of $250,000, we could only go so high with our offers. Fortunately, we had a good Realtor on our side.”
According to Redfin, 52.2% of all homes in the Kalamazoo market — which encompasses Kalamazoo County and parts of Allegan, Van Buren and Barry counties — sold above list price over the past year, an increase of 83.7% year-over-year. Only 7.8% of homes in the Kalamazoo market saw price drops over the past year. The market received a rating of 81, or very hot, on the Redfin scale of 1-100.
Lucas said she tells all buyers the sale price is going to be at least $15,000 over the listing price when it first comes on the market. If it is still on the market and not pending after 10 days, she said, the list price can be treated like the actual price. That still doesn’t guarantee you are going to get a house at list or over, though, she said.
For Dreger and Hotchkiss, the second home they bid on was in Martin. The home fit that bill, and had been on the market for a couple weeks. While they were debating placing an offer, they received notice the seller’s deadline for accepting offers was being moved up. So, feeling the competition, again they came in at $15,000 over. And, again, they lost out.
“It’s been intense,” Lucas said. “It’s all about finding ways to get creative.
“I think of multiple offers as standard at this point and, really, we’re happy when we are only competing against 3-5 offers. It gets really intense when you are going up against 15, 20, 30 offers.”
Just a few years ago, Lucas said, it was standard practice in negotiations to see a seller cover a buyer’s closing costs. Now, the opposite is happening.
“As an agent, you have to find the best way to compete,” she said. “Each buyer you are working with is unique in their own situation and you’re trying to find the best way to spin their marketability because when you have 20 offers come in around the same price point, it’s about looking at different terms and conditions that each particular buyer has presented and figuring out which one works best rather than the actual price.”
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In addition to offering to cover the seller’s closing costs, that might mean agreeing to purchase the home as-is — regardless of what the outcome of the inspection is — or granting the seller 45 days of possession time after the home closes to allow them to find their next home in a hotly contested market.
“From an industry standpoint, we’re managing a different set of rules to the game,” said Dan Jaqua, owner and president of Jaqua Realtors in Kalamazoo. “How you structure your closing time frame is part of the negotiations now. If you can offer the flexibility that the seller exactly wants, whether that is closed in a week or closed in three months, that’s going to improve your potential for your offer getting accepted.
“Right now the market is obviously favoring sellers, which is a bit of a contradiction in terms, because it only favors sellers that don’t have to buy something else. I know I am going to get my house sold fast, but how long is it going to take me to find one? It becomes about managing the other aspects of real estate that aren’t really real estate, but more strategy.”
Inventory at play
Jaqua said despite inventory numbers being much lower than they have been, the stock is still there. It just doesn’t sit on the shelves for long at all, especially in the middle-income price range of $150,000-$300,000, where most houses are moving in a single weekend.
As of June 27, there were 147 single-family properties for sale in the Kalamazoo market. Over the past month, 270 new homes came onto the market, a strong indicator of how fast they are coming on and off.
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“Inventory is hard to actually calculate, because nothing is staying on the shelf,” he said. “Imagine a grocery store that doesn’t have anything on their shelves but in the storeroom there’s stuff to be stocked. So every time the stock boy comes out to put something on the shelf, it gets picked up. That’s how things are right now. The shelves are still getting stocked.
“It would be much different if things weren’t coming on the market. Things are coming on the market, but they just aren’t staying on.”
Still, Lucas points out, in May 2020 there were roughly 600 homes listed in the Multiple Listing Service database and if you go back to when the recession hit in March 2008, there were 3,800 homes listed in Kalamazoo.
Even if things cool down, she said, no one should expect inventory to jump to recession levels.
“I can see it going back to 600-800 homes for sale eventually,” she said.
What people need to understand, Jaqua said, is that the Kalamazoo market has been hot for a while, it’s just now getting hotter.
“We’ve had seven or eight years of year after year saying this is the best year in real estate,” he said. “And I’m talking volume, not units, and that includes the year of COVID when volume was up 8%.
“We went from $225,000 at the end of 2020 to $236,000 after quarter one to $244,000 right now. It’s just continuing to escalate.”
That current average sales mark is 103.5% of the average list price, according to MLS data.
How COVID changed the market
The low inventory and fast-moving market has kept many people away, both Realtors agreed.
Many of those people have opted to stay where they are, take advantage of record-low interest rates and refinance, but there are plenty of other factors that have put existing homebuyers on the hunt for a new home in recent months, Lucas and Jaqua said.
While a homeowner may be able to refinance easily into a better rate and get cash out, contractors are so backed up and construction costs high, the agents said it makes home improvements more timely and expensive. As well, there are many people who are feeling they have outgrown their home over the course of the pandemic, as work and school from home has led many to feel a need for something different, Lucas said.
“The problem is, they aren’t quite sure how to jump to the next house.,” she said. “They know the house they are in has a lot of equity and will sell very quickly, but where do they go? It’s very scary as a seller, knowing that if you put your house up, it’s going to sell in 5-7 days.
“And finding a short-term rental in Kalamazoo is incredibly hard. One of our last rentals that the Harrington Team manages got 120 applications. In my mind renting may actually be harder than home-buying at a certain price point in Kalamazoo.”
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