Real Estate News with Terri Taydus, AHWD, CNA, CRS, GRI

BUYING IN TODAY'S CRAZY MARKET!

If you haven’t heard, the local real estate market is crazier than ever!  The lack of inventory and high demand are driving prices up, and creating a bidding frenzy on pretty much any home that is in reasonable condition and in a semi-desirable location.

I am seeing 7, 8 or more competing offers coming in on homes that are priced at the top of their market value – it’s crazy!

This frenzy is creating problems with appraisals and financing, and makes it all that more important to work with a real estate and lending professional that knows the market and can advise you through the pitfalls.

Problem:  Home values typically tick up at a slow to moderate, STEADY pace.  When a home appraiser appraises your new home for your lender, they typically look back on listings that have recently sold.  In a “normal” market this is fine.  But in a market such as the one we are seeing today, every home sale raises the bar and sets the new “norm” (i.e. your purchase will become the new “high price” that will set the comps for the next purchase.)  Because we are seeing home prices JUMP $15k - $70k with every sale (on the average) there is no way for the appraised value (i.e. the value looking back on sold comps) to keep up with the actual “Market Value.”  This is one reason it is imperative to use a local lender that uses local appraisers (not an appraiser form another county).  You need an appraiser that knows the local market and can argue the value with the investor lending you the money to buy your home.  Having said all of that, appraisals have still been problematic because no one could have foreseen home prices jumping by leaps and bounds as they have been since the beginning of 2014.

Let’s chat about multiple offers.  In the current market I am seeing 4 and more competing offers being presented on homes that are in reasonable condition and priced at the top of their market value (and as many as 8 or more competing offers on homes that are more reasonably priced!)  In a situation where you are the only offer on the table, or where you are competing against one other offer, you have the luxury of submitting an offer with some wiggle room (i.e. submit an offer in hopes that the seller will counter you prior to accepting another offer or maybe even play two offers against each other.)  However, when there are 3 or more offers on the table, chances are the seller will not bother with a counter offer, they will simply go with the best offer that is presented to them.  This is where you need to rely on the knowledge of your Realtor.  Your Realtor will look at items such as the number of days the home has been on the market, the listing history, the comps and how quickly / how much they sold for, and the agent’s general knowledge of the market in regards to the demand of a home in such condition, size and location.  It is typically best practice in a situation where your Realtor feels there could be 3 or more competing offers to come in with your “Highest and Best” offer.  This means to offer the very most you are willing to pay for the home with the best terms you are willing to agree to.  You often only get one chance to make your offer when there are multiple offers being presented to the seller at the same time.

So what can you do to get your offer accepted?

• Use a knowledgeable Realtor

  • It is more than hiring a good Realtor, you need to trust them and listen to what they are telling you about submitting your offer.  They are not trying to upsell you; they know the market and are doing what is necessary to give you an honest chance at having your offer accepted.

• Have your finances in order.

  • You will need a prequalification letter to submit with your offer.  A letter from a reputable, local lender will have more merit than a lender letter from an unknown or out-of-area lender.

  • If you can afford a larger down payment, or to pay cash, this will help you when competing with other offers.

  • Cash is almost always king.  If you are making a cash offer be prepared to submit your offer with proof of liquid funds (i.e. a current bank statement, or other document showing you have the cash to close.  You can black out your personal account information however you will need to show your name, statement date, and statement balance.)

• BE READY TO ACT FAST!

  • For now, gone are the days when buyers have the luxury to “think it over.” Homes are selling in a matter of days, and in some cases hours.  You need to have everything lined up and be ready to pull the trigger ASAP when you find the right home.

• Be realistic.

  • Do not expect to get a “deal.”  Right now sellers are in the driver’s seat, if they don’t like your offer, they most likely have others in line to choose from.  This does not mean you have to drop your shorts, but you need to go in with your “highest and best” offer that you can afford.  Hopefully this will change as more inventory becomes available, but for now, this is what is realistically happening in the market.

  • If the comps support it, you may want to come in over asking price on a hot property if you can afford to do so.  Right now, many properties are selling for way over their asking price.  This is where you need to trust your Realtor.

  • If the market supports it, and if you can afford to come up with a bit more money down if necessary, waive the appraisal contingency.  This is the latest in a long line of strategies that is being used by buyers to get their offer accepted (and there is a good chance a competing offer will submit an offer that takes advantage of this strategy).  Because of the problems mentioned above with the appraisals, many buyers are waiving the appraisal contingency in order to be competitive.  The seller likes this because it is one less contingency that could potentially kill the sale in a market where home prices are rising faster than the appraised values. I am happy to discuss the pros and cons of this strategy with you.

I know that this is discouraging news, but do not lose hope!  There are homes out there to be purchased.  I know this market and understand what it takes to get your offer accepted J