I am finalizing an offer with some terrific out of town clients - first time buyers - who have been looking for some time. In their price range and area, almost everything for sale is an REO, a short sale or a pre-foreclosure. Many of them are pretty ugly and need a lot of work. Schools are important and must be factored in.
We submitted an above-asking offer on a pre-approved short sale in nice shape (there were 6 offers when I called the agent, all above asking price) and got outbid. We have a pending offer on a short sale that has been sitting for 8 weeks now. No movement there...no surprise, and we are not in the top position. We have toured probably 30 homes and they are pretty anxious...and tired of the process.
On Saturday a new home hit the market. In the price range, with beautiful photos, in an area they like and IT'S A REAL SALE. Perhaps only one of a handful in the entire community, and it is in beautiful shape (truly MOVE IN).
They drove into town (a significant drive, the second in 1 week), an offer was submitted, and it was off to the races. It is a return to the seller's market of days past - nothing like I have seen for some time. There are numerous offers (in the double digits as of yesterday per the agent as of last night), many of them over asking price, a real feeding frenzy.
It is obvious that people:
(1) recognize the value of a well-priced home in this market
(2) like seeing something that is in great shape as opposed to the distress sales and REOs; and
(3) are sending a message about their feelings about dealing with short sales and REOs, none of which in my area are getting this sort of crazed response.
AND it also sends a signal that there ARE a good number of buyers out there, at least in the under $400K range, that are ready to pounce on the right opportunity. The agent was pleased, but overwhelmed with the volume and the variety of offer terms and conditions. And in this case the seller is truly in the driver's seat.
What is REALLY fantastic is it looks like we are the party getting a counter offer based on terms my clients are already agreeable to per discussion today. We'll know tonight. If it goes our way, it is not simply about price since there are other higher offers. Watever the outcome, is has been a wild ride already.
The whole psychology of making an offer in this situation, knowing that there will be multiple bidders immediately, is a challenge, as are the practical issues:
- How quickly to respond
- How much to offer
- Whether to provide an offer expiration time or not
- How quickly to propose closing
- How aggressive to be on contingency removal dates
Buyers worry about being TOO interested but don't want to lose the house to someone else. And wonder if the sellers will counter everyone, looking for best and highest, or just selected folks?
And what about the appraisal, an issue in this market with the large number of homes selling that are REOs and short sales: what if it falls short?
An opportunity like this, in our market, requires us to switch gears, and our thinking about how to proceed. The counsel we provide to our clients, and the offer strategy we help them develop, must be different from the typical sale where we are the only offeror, or in the case of short sales, pre-foreclosures, and REOs, themselves a unique animal as far as offers go.
It is, indeed, further evidence that this is a complex market, not easily described nor consistent from area to area, or even within a given locale. The media have no clue.