Homebuyers can expect more work and higher prices

Investors buying up properties with wads of cash. Outsized loans for palatial spreads. Open houses drawing twenty buyers to the first showing, and bidding wars galore. With average time on market down 25 percent and inventory shrinking 31 percent from this time last year, it’s clear that the real estate rush is on. No wonder — buyers chilled by the recession now face a ticking clock. A 30-year fixed-rate mortgage was 4.59 percent at the end of July, up from 3.74 percent before Memorial Day. This week, Grid profiles five buyers who have waded into a market that’s shifted rapidly in the last 18 months, describing their challenges and pairing them with professionals.

The bidding warriors: Lindsay Rau, 30, and Josh Rau, 35

Real estate agent: Rebecca Thomson, Jameson Sotheby’s International Realty

Price range: $500,000-$750,000

Problem: The Raus, who grew up in Wisconsin and moved back to the Midwest two years ago, after a decade in New York, were looking at houses all over the city, from Edgewater to Bucktown, Logan Square to Roscoe Village. Whenever they found something they liked, the house would be flooded with as many as 10 other offers, including investors who were bidding well above the asking price — and willing to pay cash.

“It started to make me feel a little depressed, thinking that even if we found something we liked, we wouldn’t be able to compete,” Lindsay says. Josh, an architect, wanted a house built in the 1920s or earlier but needed only moderate renovation; Lindsay, a natural-foods chef and wellness educator, was looking for a backyard with space for a garden. But after getting outbid by investors with fat wallets and itchy trigger fingers, they began to consider staying in the rental market.

Advice: “The way to win out in a multiple-offer situation is having a very clean offer, no strings attached,” Thomson says. That means lining up financing in advance — not just enough to cover the asking price, but a cushion in case the bidding escalates. Thomson did what she could to make sure her clients wouldn’t get squeezed out: during the search, she kept the Raus’ lender on speed dial.

Thomson told the couple to expect sellers to dictate terms, but she didn’t want them agreeing to risky proposals that she saw other bidders accepting, such as waiving a home inspection. They also had to lower their sights. Originally expecting a market that would allow them to buy at a discount, they soon discovered that they couldn’t afford the places they’d expected to be within the high end of their range.

Result: After looking at between 50 and 75 houses over an 18-month period, the Raus recently went under contract for a century-old brick two-flat in Andersonville — with a backyard — that has the potential to be converted into a single-family home. It needs more work than they wanted to sign up for, but they liked the quiet street, the building’s history and charm, and the clean, airy feeling inside. “There is the inexplicable feeling of a house that just feels good and right,” Lindsay says. “I think it has something to do with a place feeling cared for over the years.”

Even their successful bid has a rocky backstory. Originally outbid on the property, the Raus finally secured their place when the other buyer backed out before the home inspection. The sale is currently pending.

This week, Grid profiles five buyers who have waded into a market that’s shifted rapidly in the last 18 months, describing their challenges and pairing them with professionals.

Monday: The rookies

Tuesday: The empty nesters

Wednesday: The nest-builders

Thursday: The bargain hunter

Friday: The bidding warriors

Photo courtesy of the Raus