If you are wondering if this year’s market is as crazy as it was last year, the answer is yes… it started even earlier this year! I showed 6 properties to buyers yesterday, most the first day on the market. All but one are either already pending or reviewing multiple offers. In this environment you really have to make decisions quickly, so I make sure to give as much information as possible to buyers ahead of time so they can review and prepare in case they find a property for which they want to make an offer. It helps that most properties now come on the market initially as Coming Soon so you have more time for advance preparation… but there are some things you can’t really tell until you actually visit the property. Driving by the house and exploring the neighborhood before your visit can be helpful for properties that are of primary interest. Below are some questions to ask if you are thinking about making an offer.
Questions to ask…
- Does the neighborhood appeal to you?
- Are there any planned changes to the neighborhood?
- Does it fulfill your ‘must haves’?
- What are the property’s drawbacks for you? i.e. you like the property ‘but’…
- Are you ready to stop looking and start packing if your offer is accepted?
- How long has the property been on the market?
- What is the age/condition of the roof, furnace, A/C, water heater, windows, etc?
- What has been selling around the property? List-to-sale prices?
- What is the history of the property?
- Is there anything of concern in the seller disclosures?
- What is the seller’s timetable? Does it align with yours?
Key points for winning offers…
- Solid financing and substantial earnest money are essential to demonstrate you are serious about the property and the seller doesn’t have to worry you won’t make it to closing
- Match closing date to sellers needs
- PRICE – average sale price is still greater than list price, and sale price is a key point of your offer
- List-to-sale prices of properties that have been selling around the property can give you an idea of how much to offer
- Don’t offer so much that you will regret it if you win, but be aware that the winning offer may be higher than you expect
- Escalation clauses (offering $x over other highest bid) have become popular, but not all agents/sellers will respond to them
- Come in strong from the beginning, I have been experiencing more sellers accepting strong offers without calling for ‘highest and best’
- INSPECTION – it seemed like most properties sold without an inspection last year, but so far this year this doesn’t seem as essential (of course that can change)
- Having a walkthrough consultation with an inspector to look for major concerns can be an option to allow you to make your offer not subject to inspection
- If you have an inspection, make the inspection period as short as possible
- Inspections can also be good for the seller by establishing a baseline if any issues arise later
- APPRAISAL – with so many properties selling for prices way over list price, sellers are often concerned about whether it will really close for that amount because of appraisal issues
- It has become fairly standard to offer some sort of appraisal gap coverage – a set amount of $5k, $10k, $20k, $30k to bridge the gap if the appraisal comes in lower than sale price
- Full appraisal gap coverage is preferred, and sometime the seller may counter that as a condition for accepting an offer
- Although appraisal gap is a concern for sellers, I haven’t seen many issues but I know they exist… so many offers above list price help support higher valuations
- An example of full appraisal gap coverage: if sale price is $500,000 and appraised value comes in at $475,000 you would need to bring an additional $25,000 to closing… but your loan would be based on a value of $475,000 instead of $500,000 so you would bring a lower down payment
- LOVE LETTERS – letters from the buyers to the sellers conveying how much they love the property have generated much controversy
- Sellers often like knowing something about the buyers to help them make their decision
- But there is concern this can also lead to conscious or unconscious prejudice
- Be sensitive to direction from the listing agent about submitting love letters
Be careful not to get so caught up in buying frenzy that you make an offer you will regret. Ask yourself how you would feel if you offer is accepted. If you feel a pit in your stomach you may be making an offer that isn’t right for you… it may not even be the right house. Don’t panic… the right home for you will come along. I see it happen over and over again… when it is right, everything falls into place. Just relax and go with the flow, as the old saying goes.
Sharlene Hensrud, RE/MAX Results – shensrud@homesmsp.com
