Are We in a Buyer’s or Seller’s Market?
Homes that are well priced and marketed effectively tend to sell within a few weeks, and often with multiple offers – yes, even during the Covid environment! Because interest rates are around 70-year low levels, and fewer sellers are putting their homes on the market than typically would have by this time of the year, buyers are having much greater challenges. This is especially the case with homes in the median or lower price ranges.
Here are some tips based on many multiple offer situations our team has been involved in during this period. The basics are still the same regarding buyers having a lender letter of pre-approval and verification of funds, augmenting the offer with a personal letter and often a photo, and making every effort to be sure the offer is presented in as acceptable a manner and form as possible.
However, the more successful buyers tend to be the ones who are psychologically prepared either before beginning the process or after having learned the hard way that hesitancy and “analysis paralysis” can be fatal in competing with others who are more committed and prepared. They usually have a clear idea of what their actual needs are, as opposed to various elements they might also like or want if possible. They understand that basing an offer on average prices per square feet may lead to either over-paying or under-offering, simply because of not factoring in other more significant aspects such as lot size, specific location, quality of views, condition of the home, etc.
Some Think That the Highest Bidder Will Always Win
That is not always the case. For example, an all-cash buyer with few and short contingency periods might be more appealing to the seller as compared with a buyer who may offer more money but asks for time to get a loan and a longer escrow period.
Many buyers today assume that they can get a better deal if they buy through the listing agent. They may not be aware that the agent has been hired by the seller to do their best job for that seller, whether they only represent the seller or also a buyer on that listing. In fact and in law, the agent has a fiduciary responsibility to the seller to get them the best price! Even if the agent agrees to give some portion of their own commission back to a buyer, the buyer may end up paying more for the property because of the agent’s legal requirement to act as a fiduciary to the seller.
No one has an infallible crystal ball to know where the real estate market or interest rates will be over the next year. However, if the demand remains strong for homes in a prime area such as ours, buyers who are not decisive and flexible may continue to be disappointed and frustrated at the process.
Tips For A Smooth Purchase Process
Prospective buyers often ask us about what actions they should take to assure a successful purchase process with the least amount of stress or pressure.
Pre-qualify for Financing
It may be beneficial to talk with one or two potential sources of financing and be pre-qualified to have a solid understanding of what you may be approved for in a loan.
Find a Realtor
Find an experienced agent you feel a good rapport with and have confidence in based upon several years of working with buyers in the area you are interested in.
Beginning the Home Search
Find a home after first carefully assessing your wants and needs, and working closely with your agent to help you find the most ideal fit for your lifestyle.
Review the market values of homes most comparable with your agent. Negotiate the most favorable terms and conditions for the purchase, keeping track of your long-range purpose which is to enjoy a home not just obtain an asset.
When Making an Offer
Begin the loan application process, and provide your loan officer with all of the information requested as soon as possible. Perform as many inspections as are recommended to learn as much about the property condition as you can.
Resolve any issues or serious concerns with the seller in a fair manner. Be sure your agent is involved in the appraisal process. Provide all lender closing conditions requested by the loan underwriter.
Schedule and do a final walk-through to approve the property condition prior to signing the loan documents. Arrange for all utility transfers in advance.
The Final Purchase Process
DO NOT do any of the following:
- Don’t change jobs or employment status.
- Don’t make any large purchases, such as a car or furniture.
- Don’t be late on credit card payments.
- Don’t run any additional credit reports.
- Don’t make any large deposits or withdrawals.
- Don’t forget any liabilities or debts in your loan application.
All escrows have the possibility of surprises and challenges, but by following these suggestions, the challenges can be minimized and thus assure a less stressful process.
Multiple Offers on House? Tips for Buyers
Home sales are breaking records. Yet buyers continue to run into roadblocks. There just aren’t enough homes on the market to keep up with demand. That leaves sellers with an interesting problem, How do you know which offer is best?
Multiple Offer Situations are Commonplace for Buyers to Encounter
If you know someone who’s sold their home this recently, you’ve likely heard a bidding war story or two. According to a Coldwell Banker study, nearly half of recent home deals came with multiple offers.
This has occurred fairly often since the local real estate market began its recovery in 2011 and is a refreshing change for many sellers who previously wondered if anyone would make an offer on their property.
Conversely, of course, it has become increasingly frustrating to well-qualified buyers who repeatedly are outbid in their attempts to buy a home and are rejected time and again.
The following are some suggestions based on my having participated in hundreds of multiple offer negotiations, and our evolution of a system that has proven its effectiveness for close to one hundred clients.
Buyer Tips to Help Succeed in Out-Bidding Competitors
- Be as close to being an “all-cash” buyer as you can, ideally either actually having the cash available or, at a minimum, being fully approved for financing before writing an offer.
- Select an agent who has successfully guided many other buyers in multiple-offer situations.
- Know the market inventory well and become familiar with what has recently sold by attending open houses, etc.
- Have a family or personal photo ready to have presented with your offer, as well as an introductory letter that your agent can help you prepare.
- Be as rational and disciplined as you can, and be willing to either step up or pull back depending on the circumstances.
- Take the long view, remembering that you may be living there for many years. For example, the house can be changed in various ways, but the location cannot.
- Ask your agent to counsel you on contract details that may improve your position at little cost or risk to you. A seasoned agent will know ways to make your offer stand out over others.
- Be prepared to make decisive decisions in a short amount of time – you might not get another chance.
- Consider that your cost of ownership may be largely the monthly payments, whereas the seller’s sale price is all they receive and will have toward their next purchase.
- Remember, regardless of how many attempts might not succeed, there will almost always be others coming on the market in due time.
Be Sure To Do Your Final Walk-Through Inspection
Once the buyer has removed all inspection contingencies, the escrow continues until the date of closing. All purchase contracts also include a provision enabling the buyer to do a final walk-through inspection before closing.
The Inspection is Not Another Continengy
This inspection is not meant to be an additional contingency but is to be sure that the property condition is as it should be according to the contract.
Fixtures that are not specifically excluded from the sale contract should remain built into the property. These include light fixtures, wall sconces, built-in wall systems, built-in refrigerators, etc.
Most buyers understand the importance of having the home examined by a home inspector, but some don’t do a pre-closing inspection.
Surprises in Real Estate Tend not to be Good
To minimize major surprises, a buyer should schedule the walk-through as close to the actual closing as possible, certainly within 1-5 days prior to closing, preferably after the sellers have moved out. The whole point of the walk-through is to protect the buyer from sellers who are not as thoughtful or fair-minded as they could be.
By inspecting the premises, the buyer can make sure the seller has lived up to his or her agreements in the sales contract. And if he or she has not, the buyer wants to know about it before the closing so remedies (both monetary and otherwise) can be agreed on before the sale closes.
What to look for in a Final Walk-Through?
The home purchase contract includes a period of time for the buyer to do any property inspections. The buyer may reasonably disapprove of any conditions discovered during the inspection time. What should a buyer look for in a closing inspection? To start, he or she should make sure that the condition of the home hasn’t changed since the contract was signed several months earlier. Things can change in 60 days, and a buyer does not want any surprises at closing.
There are several “musts” in a walk-through: ideally, the buyer and his or her agent should both do the pre-closing inspection. They should turn on every appliance, open every door, make sure nothing is broken, They should be certain everything the seller agreed to leave is actually there and in good shape and that when the sellers moved out, they did no damage to the home.
Some things to Specifically Check for?
The contract should be checked to be sure what the seller agreed to leave. Was leaving the refrigerator part of the agreement? Are the window shades or curtains supposed to be left? Or was it agreed that the seller could take them?
If the seller is present at the walk-through and asks if they can take any items, the buyer can delay responding by asking for time to either think about it or check with someone else.
If something is missing or damaged and the seller is present, it may be better to avoid a confrontation. The buyer’s agent can speak with the seller or seller’s agent to confirm what is in the contract.
If missing items are not returned before the closing, you may need to agree together on a credit, renegotiate the price of the property, or delay the closing.
Michael Edlen has been involved in multiple offer negotiations since 1987, including several that had 20-35 offers. He and his team have carefully developed strategies for multiple offers when working with both buyers and sellers.