HOW TO BUY A HOME IN A SELLER'S MARKET!

Buyers are stressed, to say the least! Meeting with a loan officer, applying for a pre-approval to purchase a home is a bit cumbersome, yet worth every minute. Being new to this process, it is the anticipation of what qualifies you? Is my credit score high enough? How much will I qualify for and will it be enough to buy a home? After all, if you need at least 3 bedrooms, you are not going to settle for a 2 bedroom, in that case, you are better off renting. 

After providing all the necessary paperwork, you get the good news that you qualify to buy! Now, you cannot wait to see all the homes you already fell in love with online. Your first call is to your Realtor, or to find a Realtor.

Tip: Think about speaking with 3 different agents and ask about their current experience with buyers. 

Next, you pass on to your agent, all the MLS listings of the homes you want to see first. To your surprise, they have all sold! Now what?

So, you have your agent put you on an auto email, with your criteria, location, number of bedrooms, bathrooms, garage stalls, etc...

Now, you are informed of new listings the minute they go on the market. Great! There is an easy solution to that problem.

In one week, 5 homes come on the market that you are interested in. It is Tuesday and you and your spouse are available after work, at 3:00 pm on Thursday to see these homes in person. How fun! Thursday comes along and you have 5 appointments. You meet your agent at the first home and your agent has bad news. Two of the 5 appointments she had to cancel because the sellers accepted an offer that morning and are not allowing any more showings. 

BUMMER! One of the 2 was your favorite! It had a remodeled kitchen with a huge island and an open floor plan.

Well, you now question, why didn't we see this home earlier, and is there something your agent could have done to notify you earlier?

Giving your agent the benefit of the doubt, you carry on. The other homes you saw that day were nice, just not as good as the one that sold.

Next week comes along and there are now 6 homes you are interested in and 2 seemingly perfect. Instead of waiting 2 days to see these homes, you now make time to see all these homes the following day. 

EVERYTHING is coming full circle, you found your favorite and told the agent you would like to make an offer, your FIRST offer, very exciting.

So, the home is listed for $300,000, how much do you offer? What do you pick for a closing date? Do you do an inspection, if so, how many days do you ask for? The home is 30 years old, should you ask the seller to pay for a home warranty? What happens if the house doesn't appraise for the amount you offer?

This is the beginning of a crazy process filled with the "unknown." 

You take your agent's advice, and you give a full offer for $300,000. Your agent calls you the next morning and says, "the seller is asking for the highest and best offer by 5:00 pm today. Would you like to increase your offer or change any terms of your offer?

Well, this is stressful, how do you know what to do? You have never purchased a home before, and you do not know what the other offers are. So, again you ask for your agent's advice. She informs you because there are multiple offers, you should offer above the asking price. So, you and your spouse question, how much above the asking price? You do not want to pay too much.

You and your spouse decide to offer $305,000. Because you love the house, it is worth $5,000 more! Later that night, your agent calls to break the bad news, the sellers chose to work with another offer.

UGH! Why? You wonder. 

Well, I am here to say, there are many factors involved and reasons the sellers may have chosen a different offer. I will tell you what your agent did not do.

You need an agent that is willing to "go to bat" for you and not take the lazy route. 

TIPS FOR MAKING AN OFFER IN A SELLERS MARKET:

#1: One strategy sellers use is to list very fairly, somewhat less than list price, in order to increase the exposure. They will get many more showings, knowing there will be multiple offers, and their goal is this will create a buzz and they will end up with a higher offer. 

• Your agent should have pulled comparables in the area and advised you to make an offer based on true market value, not based on the list price.

#2: It's not just the offer price yet also can come down to terms. For example, does the seller prefer a quick close or more time before closing?

• Your agent should have had a conversation with the listing agent to find out preferable terms for the seller. 

 #3: There is a difference in making an offer on a home where there are one or two other competing offers versus 50 other offers.

• Did your agent find out, or get an idea of how many offers the seller was expecting?
• What could be in those offers which are more appealing than yours?

My partner and I recently had buyers who offered on a home in which the seller was deciding between 58 offers!

 

There are many angles an agent can take in order to make sure their buyer's offer is at least in the top 5! Start with COMMUNICATION.

 

If my team was representing the buyers in this scenario, the offer would have been much stronger in both price and terms and more personal. Sometimes part of a decision for the seller is emotional. My team would have educated the sellers regarding the buyers. 

• They are motivated. 
• This is why they love the house... 
• They are serious. 
• They are WELL qualified and the loan officer is available for a discussion.
• They will do the inspection as fast as possible.
• They are educated regarding the inspection process. 
• They understand the home is 30 years old and they are not going to make ridiculous requests based on the inspection!

#4: When offers are 5-10% above list price, or more, sellers are concerned, what if the appraisal comes in lower? What happens:

• The lender will only finance up to the appraised value.
• Buyer and seller need to agree on the appraised value as the sale price, or the buyer needs to bring more cash to closing to make up the difference. 

In this market, it is not uncommon to see offers where the buyers are offering what is called "appraisal gap" insurance to the seller. For example, as a buyer, you can add to your offer that if the appraisal comes in less than the offer price, the buyer will cover the difference, up to a certain dollar amount. BUYER BEWARE! This should only be considered in the right circumstance, with an experienced agent providing extensive research and educating their buyer on what this means and entails.