Real estate is local. Repeat: real estate is local.
What is happening in our neck of the woods in the Bay area of California may not happen in other cities or states. And our language may also differ because we encounter different scenarios, different challenges.
When I mentioned to a realtor in another state that we typically set offer dates, she didn't quite understand what I was talking about because she's never encountered it.
And buyers are often confused when they see a list price and are encouraged to submit an offer higher than list price with bigger downpayment, shorter contingency periods, etc. For the buyer who is new to the area, here's a quick overview.
Agents and their sellers agree on a date when they will review offers.
Buyers agents may choose to submit their offers sooner than the stated Offer Date, but they are told that the sellers will not look at them until then.
Typically, in a robust seller's market, the property is made available for viewing for a period of two weeks before an offer date is set. This enables the sellers to have two consecutive weekends of open houses if preferred, and at least one broker's tour, plus the usual showings during that time.
On Offer Date, agents typically call the Listing agent to inquire how many offers they have received or expect. This gives them an idea on how to prepare their offer.
During a period when there is very little inventory for many buyers, a Sellers' Market is created. Simple case of supply and demand.
When that happens, a property may receive more than one offer.
Note: It is not unusual for an agent to revise an offer once he hears how many offers were submitted. Several agents will even request to be in back up should the winning offer back out of the agreement.
This is when buyers submit offers for amounts higher than the listed price.
As distasteful as this may be for buyers who "won't play that game", they have to adjust their thinking and way of doing business to compete in a sellers market.
The list price is just a starting point --- it shouldn't be seen as the final sales price or what the sellers are willing to sell it for. In many markets, the final sales price is over the list price. By how much depends on the pricing strategy.
Buyers should be prepared to adjust their expectations. If their budget is $500,000, then they should set their sights lower, and find homes in a lower price range so that they have room to bid up.
Shorter period or None at all
There are basic three contingencies or conditions when writing the offer.
And of course, the final buyer walk-through to make sure that the property is in the condition that was agreed upon, and that the fixtures. appliances that were checked in the contract remain at the property.
In the heat of a sellers' market, some buyers take calculated risks when they shorten the contingency periods for less than 17 days for appraisal, less than 21 days for loan approval, and may even waive contingencies for buyer inspection.
Some buyers may request pre-inspection of a non-invasive kind by having their own inspectors walk through the house with them. Later, armed with the inspector's report, they take a chance and write offer without a buyer inspection contingency.
Other buyers with substantial cash down payment, or perhaps all cash purchase, waive the loan appraisal and approval contingencies.
Waiving contingencies may have pitfalls, so it takes a very bold buyer with substantial cash to do so. Without contingencies, the buyer is locked in. Backing out for any reason may cost the buyer his/her initial deposit (up to 3% of purchase price) as liquidated damages.
Our local markets are over-heated, and may prompt gasps, heads shaking in disbelief....
· Berkeley had a 34% appreciation from the same period last year
· Albany with 21%,
· Newark with 20%
· Oakland with 17%
· Alameda with 15%
· San Leandro and Castro Valley with 13%
People moving into the area should prepare to be amazed, and should adjust their expectations.