Just like in the UK, the American housing market is on fire – activity and demand at all-time highs. And the desperate measures being taken by buyers to fend off the competition should serve as a warning for UK buyers.
When a buyer offers to pay $1 million over and above the asking price in order to secure the purchase of a home, you know we live in extraordinary times. But that’s exactly what is happening in the USA right now, with huge piles of additional cash being just one of the many creative ways buyers are trying to tempt sellers to choose them and not one of their many clamouring rivals.
As reported by CNN, deal sweeteners such as Caribbean holidays, expensive bottles of wine, extravagant dinners, and even agreeing to buy two houses just to live in one are some of the things buyers are using to win over sellers in the face of stiff competition.
Even cryptocurrency has been added to the mix, with one US buyer offering to throw in 10 Ether coins at a time when Ethereum was trading at $3,900 per coin. This is a total cash value of nearly $40,000. The generous gift was offered when the wannabe buyer heard that another potential buyer was offering $25,000 over the $530,000 asking price.
But perhaps the most mind-bending story comes from Austin, Texas, where 50 people were competing to buy the same home. One wannabe buyer offered to pay $100,000 over the asking price, but this was matched by a rival bidder. So, in a bizarre turn of events, the buyer offered not only to buy the home in the question, but also buy the seller’s next home for them.
This meant that, in total, the buyer ended up paying $500,000 for the home in question, and then another $500,000 for the home that the seller wanted to move into.
The rationale was that, by paying $1 million for a home worth half the price, the buyer was concerned their tax bracket would be pushed up, so instead decided to use this loophole to give the extra cash to the seller.
What does this mean for the UK market?
Here in the UK, there are already many instances where buyers are paying over the asking price in order to secure a new home at a time when demand and supply are further out of whack than they’ve ever been before.
While we’re not quite hearing stories to match those coming from the US, this doesn’t mean it couldn’t soon start happening.
That’s because there is a growing trend of people moving away from cities and into more regional, rural parts of the country. In doing so, they’re realising how far their money can stretch. They’re selling flats in London for £500,000 and discovering generous houses for sale at the same price point elsewhere in the country.
So, when they find a home they love for £400,000, throwing an additional £100,000 on top to sweeten the deal is not out of the question because they still feel they’re getting great value for money.
If we do start to mirror the activity happening in the US, it’s only going to benefit the most wealthy of buyers because they will be able to outbid anyone whose budget is less generous. First-time buyers, for instance, will struggle greatly to secure a purchase if wealthier rivals keep swooping in with deal sweeteners.
The only thing that can avoid this happening is a swift increase in the number of properties on the market. But this doesn’t look like it will happen for at least a couple of years.
