Depending upon WHEN you want/need to move, you may have few choices about market conditions and whether they favor buyers or sellers. Last season’s hot market certainly favored sellers and buyers were scrambling to complete for low inventory in an appreciating market.
Buyers are discouraged when they are beat out time and time again by those with higher offers, better financing or cash, and terms that they can’t or won’t match. When they do eventually get that exciting call – “your offer has been accepted” it’s a joyous moment. Sometimes though as the transaction progresses, the excitement wears thin. This is especially pertinent for First Time Buyers. Here are a few of the issues buyers and their agents face.
How Many Offers Did You Beat Out?
The practice of having an offer due date/time was very common last year, and still shows up on many properties. Listing agents don’t know until the deadline is upon them how many offers they will actually have. A buyer agent can call and ask, but the info obtained at the time of the call can vary greatly than what actually occurs when the offer cutoff arises.
On one listing, I expected 6 offers based on agent inquires. By the time the due date and time arrived, I had received 18.
Representing a buyer on another transaction, the listing agent told me that 3 other agents said they were submitting offers. My buyers wrote, but none of the other offers came in. The agent didn’t misrepresent anything – he told me what he believed based on what other agents conveyed.
In the first case, a few agents who got this feedback were upset. They may not have written if they knew there would be that many offers. (But I didn’t know!)
In the second example, my buyers felt that they overpaid. They’d lost out on 3 previous houses – as agents, we can never be sure who is going to submit or not.
I Removed My Appraisal Contingency and The Property Didn’t Appraise
Appraisals are based on closed sales of comparable properties. Those sales may have occurred anywhere from 1 to 120 days prior to the active listing on which you are offering. The number of people competing for the same property may be great, but that’s an issue of supply and demand. The appraiser can only account for what has actually occurred and adjust slightly for an appreciating market. By the time your sale closes, other sold comps may support the price, but the appraiser is required to base values on what is, not will be. Depending upon your loan to value ratios, the lender may require that you bring in the difference to close.
The market is fluid. Things beyond the control of the people in the equation (lenders, agents, appraisers) –world events and economic factors can affect interest rate,s and inventory can affect home prices and values.
I Wrote An As-Is Contract
When the market favors the seller and buyers are competing for a home, sellers may expect or other buyers may offer to purchase As-Is. (Now in California, all offers contain As-Is language already). But the expectation of sellers is that they don’t need to make repairs – some buyer out there will be willing to accept the property in its present condition.
When minor repairs are discovered during inspections, buyers often regret the As-Is clause they’ve agreed to. It may be the very thing that gained them acceptance over other offers. But as the transaction progresses, they sometimes have qualms about it. The decision must be evaluated – exit the contract and begin again on another property, or continue….
Home Aren’t Selling As Fast Now
From the time a buyer starts their search till the time they get an offer accepted and closed, a good deal of time may have elapsed. A market can experience swings in inventory or the number of folks actively looking. Holiday time, or early winter? Fewer buyers may be competing for properties so the frenzy isn’t at quite the same level.
My Interest Rate Is Higher Now
Interest rates can fluctuate in a single day. Your lender can’t predict what it will be on the day you are in contract and ready to fund your loan. That rate may be higher than what you were quoted when you applied (which could have been months previously). Some folks will experience a perfect storm in terms of price and interest rate, but it’s not predictable.
You have to make the best decision you can with the market conditions at the time and remember that real estate is an investment that historically improves over time. Looking at only the short-term picture can cause undue stress about something that is apt to change again and again over the term that you actually own the property.
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