Buyer Tips—Buying in a hot, Multiple-Offer real estate Market
My last column dealt with multiple offers from the homeowner’s perspective. What about you Buyers? The big difference between the Seller and Buyer is the SELLER will reach their goals in quick order-attracting an offer(s) and selling their house. Buyers, however, may be making an offer on their 5th property. Let us explore some strategies and tips we use with Buyers.
Why are we seeing multiple offers? Lack of inventory. As of this writing we have a tad over 500 detached single family homes and only 38 condos now “available” or ready to show in all of Sonoma County-every city/town and all price points. January 2008 we had 2422 homes available. We’ve seen inventory gradually quit coming to market. Continued low interest rates have brought out buyers and the competition is fierce. We should see the median home price, now $599,000 for the county, rise. Due to this constrained inventory and big demand, many Realtors® and agents are advising Sellers to place their house on the market, have a public “Open House” or two, a “Broker’s Open House” and then set a date in the near future to “review all offers”. This is usually done 7 to 10 days AFTER a property hits the market. By the way, best day for a Seller to place the home on the market? FRIDAY! Studies bear this out. The big question for buyers is how to submit an offer which will not only secures the HOME while standing out from the competition and appeal to the Seller.
Some buyers do not want to get “into a bidding war”. We feel your pain. However, If you are in entry level pricing for the area you desire then you may wish to just hang-out for a few months or make sure you are writing an offer on a property which the Realtor® or agent has stated, “offers presented as they come”. You’ll need to move very fast though. Will this get you an advantage? Possibly but this process begs the question—if multiple offers are coming in how will the Realtor or agent handle them? Present one but let the seller know others are forthcoming? Stall the first offer while awaiting the others? Or take your offer only to find another offer is substantially over your offer thus infuriating the Seller? So here you sit, offer on the table but the Realtor or agent is waiting for others to come in. Frustrating yes? But for now--multiple-offers and “Bidding Skirmishes” are very common.
Tips for a great offer: Your Realtor or agent will check to see when offers are to be reviewed on the home you want. It could be the listing Realtor or agent’s wishes to “present them as they come”. If this is the case then GET in there quickly and be first in line. We tell buyers in super competitive price points to “Think it over in escrow”. What we mean is your “Due diligence” timeline for inspections and having your questions answered takes place once the offer is accepted. You may have questions about permit issues, zoning regulations, septic system or well performance. Get these questions answered once the property has been tied up. Conversely, before writing your offer you can go to the county or city offices, make some cursory investigations as to permits pulled and completed, age of septic or well. Maybe you want to call Week’s well and Drilling to ask about the water table, consult with a contractor, etc. If you do this before you write an offer you’ll lose the home to another buyer who will use the contractual inspection period. This is why we advise buyers who want to “think-it-over” to do so after they’ve got an accepted offer on the Home. Remember, you can disapprove the house and contract within the contractual timelines if your questions are not answered to your satisfaction.
Also, many realty offices are advising their Realtors or agents to have Sellers put together “pre-inspection” packages with pest report, home inspection, roof report and septic and well reports completed and for review by prospective buyers. This is one way to make a good solid offer knowing many main questions have been answered. However, caution should be given to the strategy of securing a home with no contingencies. You better have done plenty of due diligence before writing such an offer or be a sophisticated contractor buyer. And also presenting an inflated sky-high price to “tie-it-up” the house only to back out two days later for no apparent reason can generate ill-will and create deposit return questions--careful! And remember, making multiple offers on homes with the intention of only buying ONE needs to be disclosed to the sellers upon presentation of any of your offers.
What other tips? Submit a photo of your family and letter. Sellers and their Realtor or agent may say, “Pretty hokey Mike!” But I was negotiating a credit of $5,000 for buyers a few years back and the wife looked at my buyer’s family photo, smiled a bit and said, “You know dear, this girl looks like our granddaughter Becky.” Yes, we got the credit! Validate the reason why the Seller loves their home—great schools, parks, commute, floor plan, landscaping, etc. Have your kids bake cakes or cookies with a letter from little “Susie as to why SHE wants to live in their home. Hokey? You’ll thank me later.
Having a rock-solid pre-approval, not pre-qualified, letter from your lender is an absolute must. The loan approval is only subject to “a preliminary title report, contract and appraisal”. Everything else should be done—proof of work, funds to close, etc. Also, having “proof of funds” for your deposit and down payment is another absolute when presenting to Seller(s) and their Realtor or agent “SHOW ME THE MONEY” so use an account statement which ILLUSTRATES funds available.
My next column will explore MORE “Buyer’s Strategies” when dealing with a tight, inventory marketplace and multiple-offers. How do you handle a “highest and best” counter offer? Should you shorten your timelines for inspections, appraisal, etc.? Join me next time for more tips and tricks from the real estate trenches.