As 2022 progresses, many potential home buyers and sellers are wondering what — if any — surprises are in store for the real estate market in the months ahead.

Will prices continue to increase? Or will prices flatten out? Will interest rates go up? Will it continue to be a seller’s market? And perhaps most of all, how will I even get a house when inventory continues to be here today and gone tomorrow?

Four northern Colorado Realtors agree that 2022 will look much like 2021, with tight inventory limiting one’s selection and multiple offers on the table.

The luxury home market (in 2021) was one of the strongest years on record, said Sharon Cook, employing broker/owner of NoCo Realty in Loveland.

“All key indicators aligned: all-time high demand, prices surging at unprecedented rates, and new listings dropping to historic lows.”

This year, the luxury market — homes costing $2 million and up and with greater square footage, unique and sometimes over-the-top designs, premium materials, indulgent amenities (10-car garage anyone?) and, of course, location, location, location — is expected to remain strong, but stability should emerge alongside growth and opportunity, she added.

Karen Bernardi, owner/broker of the Bernardi Group in Boulder said she’s optimistic about the Front Range and Boulder Valley market in general.

“Colorado still offers so much. We have good schools, transportation, skiing and the weather is moderate. We’ve still got a lot of great attractions.”

It’s also a great place to live if you can work remotely from anywhere, she said. Many newcomers, she explained, come from the high-tech industry where top-dollar salaries and stock options have made them millionaires with flexibility to sell their homes in areas with exorbitant home prices (think Silicon Valley) and move to luxury homes in Colorado with millions left in their pockets.

Whether it’s luxury homes or starter homes, one thing is clear: It’s important to have an agent who knows the market and demographic inside and out in the area in which you are looking to sell or buy. Top negotiation skills are also a must, especially when multiple offers.

Julia Cantarovici, an agent and partner with 8Z Real Estate in Boulder, said not only is it important that agents be familiar with the area, but so too should appraisers to ensure the home isn’t undervalued, especially in Boulder where real estate within Boulder city limits “is different from anywhere else. Sellers who use an agent unfamiliar with the area most likely won’t get top dollar.”

How dynamic is the market?

Cantarovici tells of a house she sold on the corner of a busy street close to Old Town Louisville but with a “funky” floor plan: master bedroom on the main level and the other bedrooms in the basement.

Multiple offers came in but her client got the house by offering an all-cash deal, no outs and seven-day closing. She paid $1.850 million for a house listed at $1.425 million.

Over-the-top offers aren’t always the norm, but one thing is certain: Cash is king, according to David Scott, an agent with Colorado Landmark Realtors in Boulder, regardless if it’s a starter or luxury home.

Bernardi said she ensures clients can make all-cash offers even if they don’t have all of the money upfront.

“We can do cash guarantees. If you don’t have all the cash, as the agent I will guarantee it and put the cash up for them.”

But for many prospective homebuyers, especially millennials, coming up with the down payment is the hard part, Scott said. It’s critical for potential homebuyers to be aware of how much house they can actually afford and to plan on bidding wars.

Cook reluctantly suggests they choose a low down payment to ensure there’s money left over for any appraisal gap.

“If you have $500,000 to buy a house, you can’t offer anything over $450,000 because you might have to spend the extra on the appraisal gap,” which is when the house appraises lower than the accepted offer. Appraisal gap clauses have, in fact, become the norm, and it’s not unheard of for that gap to be $50,000 give or take.

Homebuyers also need to keep in mind that mortgage rates now hover around 4 percent for a 30-year fixed-rate loan, up from last year’s average of 3.25 percent.

The rate increase may seem minuscule, but it will increase mortgage payments, but not like in the 1980s when interest rates were in the 16 percent range. Puts things in perspective, right?

“The Feds want to address the worst inflation we’ve seen in 40 years, spurred by COVID,” Cook said. As a result, lenders must charge higher interest rates to compensate for a decrease in purchasing power when they issue loans.

“From there, homebuyers will have to decide if they want to ‘pay more for less house’ when their mortgage estimate goes up. If enough buyers say ‘no thanks,’ then home prices will stabilize.” This, according to Cook, is the real estate ‘Circle of Life.’”

If you’re selling your home, real estate agents recommend making the emotional break upfront and understand that it is no longer your home but a product to be sold.

The next step is to depersonalize, declutter and design. And yes, your home should be staged to dazzle potential buyers.

Agents help homebuyers discern what work needs to be done before the house is listed, whether it’s just paint and new carpet or update the entire home and sometimes the landscape.

If you’re looking to buy in the coming year, make sure to have all your ducks in a row to ensure you can make an offer on the spot. Houses listed one day most often are under contract in a matter of days.

“To get into a home, successful buyers need to maintain flexibility with their criteria and consider outlying communities, like Greeley/Evans, Johnstown, Milliken and Wellington,” said Cook. “But it’s not easy anywhere.”

Work with your agent to present the most attractive offer. While cash is king, there are other ways to present a viable offer. For example, some add a clause stating they’ll pay $1,000 or $2,000 (or whatever number they’re comfortable with) above the top offer, up to a point, of course.

What you don’t want to do is forego home inspections as part of your offer, as many do, Cook said.

“It’s risky and it increases liability for not only the seller but the brokers.”

And buyers should also be aware that houses are now listed with a time frame for offers, so it doesn’t make sense to be the first offer in.

“A full-price offer used to be a very good thing. That said, the highest offer doesn’t always win; in fact, I have worked with sellers who reject the highest offer — it’s so absurd it feels creepy.”

Lastly, homebuyers should have their homes staged and photographed so that when their offers are accepted they can immediately list their own home.

By Luanne Kadlub