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Buying a Home in a Seller's Market

Supply and demand is one of the most fundamental concepts of economics. It’s basically the backbone of the real estate market. When the number of homebuyers exceeds the number of homes available for sale, it’s known as a seller’s market. This means that the seller in a typical real estate transaction has the upper hand. If you’re the buyer, you have to act fast when you find the home you want. Sometimes you’ll end up having to offer more than the asking price, especially when a multiple-offer situation arises. So how do you, the buyer, cope in this type of market? How do you know you’re getting the best deal possible on your future home?

Get approval. Before you even begin to think about shopping for a new home, get approved for a mortgage. We always recommend that buyers obtain pre-approval before making an offer on a home, but in a seller’s market, you need proof that you can afford what you’re offering. Putting your money where your mouth is—literally—shows buyers just how serious you are about buying their home.

Be prepared to shop a little longer. In a seller’s market, inventory is lower, which means houses get snatched up pretty quickly. You might have to scale back your wish list. To get a house in the specific neighborhood you want, you might have to compromise on square footage or the need to renovate. Likewise, if you have certain musts on your list like number of bedrooms and yard size, you’ll need to broaden your search beyond just a few key neighborhoods.

Be ready to waive contingencies. When the seller has the upper hand, they really don’t have to give in to any contingencies you write into the offer. If you bring them an offer that’s $10,000 over asking price but it’s contingent upon financing, a home inspection, and an appraisal, and you ask for help with closing costs…well, you’d better be prepared for a counteroffer or a flat-out no. Even if another offer has a lower dollar amount but has fewer or no contingencies, they’re more likely to take that one.

Don’t even think about lowballing. As we’ve already mentioned, buyers in a seller’s market have to act fast and be prepared to offer more. There will still be some homes that are overpriced, but in most cases, sellers who actually do have the upper hand want to see at least a full price offer. Often times there will be multiple offers on a home, resulting in a bidding war, which means you need to bring your highest and best offer to the table. In addition, a higher amount in earnest money shows the buyer just how serious you are. Just be careful not to get in over your head and saddle yourself with a mortgage payment you might not be able to keep up with for years to come.

The key takeaway here is to be prepared for anything. Make sure to get pre-approved for financing. Know you might have to pay more than listing price. Be ready to act quickly, and buying a home in a seller’s market won’t be as difficult as you think.

Choosing Between Multiple Offers

Receiving multiple offers on a home for sale isn’t a bad thing at all. In fact, it’s a great “problem” to have!  While getting more than one offer might be a positive thing, it doesn’t mean the choice between them will be easy. It might seem like choosing the highest offer would be the smartest move, but that’s not always the correct assumption. Sometimes an offer with a higher dollar amount will have more contingencies, which can make a slightly lower cash offer with no contingencies look way better. Here are some other things to keep in mind when trying to choose your buyer in a multiple-offer situation.

Know Your Priorities

Every buyer and seller has his or her own priorities, and sometimes those priorities don’t match up. For example, the seller might need to move out as quickly as possible, while the buyer might need a longer escrow period while they try to sell another home. This is a case in which multiple offers come in handy. If you have a bottom line you need to meet or a specific date you need to close by, you can choose the offer that suits that priority best.

Make Sure Buyers Are Qualified

An offer that includes an approval letter and/or a sizable earnest money deposit is probably the most serious one. An offer that’s solid as far as financing but might come in a little under the others is definitely one that should earn consideration. On the other hand, you might want to look twice at a buyer who offers the most but isn’t at least pre-approved. You have no way of knowing if they can actually obtain financing for that amount, and if they end up not qualifying, it sends you back to square one.

Listen to Your Heart, But Be Logical

Sometimes buyers will include a personal letter with an offer. This isn’t uncommon at all in multiple offer situations, especially when a family knows they might be up against an investor with cash and deep pockets. Maybe the cash investor can offer you more money and a quick closing, but what’s the right move for you? Would you prefer to see a young family give your house new life and make lots of memories there? Or would you rather help an investor out in his or her venture? A personal letter might appeal to your emotional side, but don’t let that overpower the facts. If that sweet little family includes a lot of contingencies in their offer, it might not be in your best interest to accept. There’s really no right or wrong answer here. It’s completely up to you!

Consider Motivation

Why does the buyer want your house? Is it because they have family around the corner? Is it a short walk to school for the kids? Is it just a highly desirable area in general? If someone has a good enough reason for wanting to buy your home, they’re more likely to scale back on the contingencies and bring their best, most serious offer to the table the first time.

Trust in Your Agent

Your real estate agent should be able to help you suss out the pros and cons of each offer that comes in. If they’ve been in the business long enough, they might also know a bit about the buyer’s agent. If they’ve worked with that specific buyer’s agent in the past, they might know if transactions tend to go smoothly or if it’s hard to get them to answer questions or comply with instructions. Your agent should also know who the best lenders, inspectors, and other vendors are. They’ll be able to recognize any red flags (e.g. a lender who typically takes too long to close) and help guide you in your decision.

When your home is on the market and multiple offers roll in, a great opportunity can quickly turn into a setback if you don’t choose carefully. The big key takeaway? Don’t just choose the buyer with the highest price; choose the buyer with the best terms all around.

Resale Hurdles Buyers Might Not Think About

When a buyer is shopping for a new home, they usually come to us starry-eyed and dreaming of their new, perfect home. What many of them don’t realize is that they’re not just buying a home for themselves. They’re purchasing it for the next person who buys it, and the next, and the next… The point is that when buyers are putting together their lists of dream home must-haves, they often fail to realize that they should also be paying attention to resale value later on down the road. “Sure, living in the now is important,” says one of our expert agents, “but buyers have to realize that thinking about the future is key to any successful real estate transaction.” We can’t predict the future, but we can assume that what’s seen as your minor inconvenience today could be someone else’s dealbreaker four years from now. Here are some of the most unfavorable conditions that might affect a home’s resale value.

Environmental Concerns

Sometimes environmental factors are out of our control, but we still need to be aware of them. For instance, is a home located in a floodplain that requires a hefty flood insurance policy? Is there standing water nearby that attracts swarms of unwanted pests like mosquitoes and gnats? Are windows positioned in such a way that the rising or setting sun causes one room to be miserably hot when the rest of the house is cool? These are things that can’t be changed—at least not easily—so it’s important to pay attention to them before you sign on the dotted line.

Bothersome Noises

It’s pretty common for buyers to pay attention to noise from nearby airports, highways, train tracks, and schoolyards. What most aren’t thinking about are the barking dog or chicken coop next door, the fire department a street over, or even old water pipes that wake visitors in the guest room every time someone takes a shower. Buyers should be aware of these noises that they might not hear during a showing but will definitely notice for years to come.

New Subdivisions

Be aware that if you decide to buy new construction in a brand new development, you’ll be in competition with new home builders for quite a while. Not only is a brand new home appealing to a lot of people, but builders are also able to offer incentives that other sellers can’t afford. If you plan to live in the new home for many years to come, you’ll probably outlast the building process. But if you think you might relocate in five years or so, do a little research concerning how new construction will affect resale value.

Neighboring Businesses

It’s extremely convenient to have a coffee shop across the street or a grocery store right around the corner. But buyers need to think about the disruption having certain businesses for neighbors might cause. For instance, you might love the fact that you can walk to a nearby restaurant or bar, but when you go to sell the house, some buyers might be turned off by the possibility of noise or people parking in front of their home.

Power Lines

While power lines might not be the prettiest thing to have hovering over your property, they’re not dangerous, per se. However, a large percent of the population still thinks that living with power lines nearby can be detrimental to their health. This is a myth that has been debunked by scientific studies, but that doesn’t mean buyers feel safe around power lines. There’s always the chance of them being knocked down by high winds or falling limbs, which presents its own set of problems. Luckily, power lines are run underground in many newer neighborhoods, so if you’re looking in a recently developed area, this might not even be an issue.

If you’re shopping for a new home that you intend to stay in for a long time, these points might be irrelevant. But if it’s possible you might move again in the near future, you’ll want to keep these possible resale issues in mind. For expert advice on considering a home’s resale value before you buy, contact one of our agents. They’ll be happy to help!

How-To Tuesday: What to Ditch in Every Room in the House

With spring cleaning season still in full swing, we’ve been talking about organization and cleaning a lot lately. To help you figure out the decluttering process more easily, we’re doing a room-by-room ditch/donate walkthrough. If you feel like you’re drowning in “stuff,” make a commitment now to get rid of at least one item (or one type of item) in every room in your house. Remind yourself throughout your purge session that the things in your house are just that—things. What really matter are the people, pets, and memories that live there. This project shouldn’t take too long if you’re in one of those purging moods. If it’s harder for you to say goodbye to things, it might take you half a day or so to complete.

Kitchen

When it comes to cleaning and decluttering, we almost always start with the kitchen. This is where we tend to amass a lot of stuff, whether it’s kitchen tools and small appliances we never use or broken dishes we’re holding on to for sentimental reasons. Start by checking out the cabinet or drawer that holds all of your storage containers. Like most people, you probably have a few containers that are stained, cracked, or missing lids. Toss ’em. Next take stock of your small appliances and kitchen tools. Do you ever even use that garlic press? The pastry cutter? The toaster oven? If the answer is no, ditch it! The next one’s a bit harder. Take a look at all those cookbooks you’ve collected over the years. How often do you reach for them? If it’s not often at all, put them in the “donate” pile.

Bathroom

Beauty products tend to pile up and get lost in the depths of bathroom drawers and cabinets. Empty your storage areas and toss any products that are expired, discolored, or leaky. Make sure to get rid of expired sunscreen and medications too. Prescription medications (especially controlled substances) should be disposed of properly. Next, toss any old or broken brushes, combs, toothbrushes, and hair accessories. Then get rid of your rattiest, holiest towels.

Bedroom

Get rid of any clothing that doesn’t fit anymore or is uncomfortable. If you haven’t worn it in six months to a year (depending on seasons), donate it. Check your shoe collection next. Try them all on, and donate any that are no longer comfortable or relevant. Next, rifle through your jewelry box. Get rid of anything that’s broken and not worth fixing or just isn’t your taste anymore. If you have precious metals to get rid of and want to get a few dollars for them instead of just giving them away, try a shop that buys gold and silver. Then move on to one of the most overlooked spots in the bedroom: the nightstand. Check for old papers, wrappers, medicine bottles, and other pieces of clutter and trash or recycle them.

Play Room or Kids’ Room

If the kids aren’t good at letting old things go, you might have to do this one when they’re out of the house or at least otherwise occupied. Start with art supplies, tossing any broken crayons, dried-out markers and paints, and coloring books or drawing pads that are full. Get rid of toys that are broken or aren’t age-appropriate, puzzles that are missing pieces, stuffed animals that don’t get played with, and any books your kids have outgrown. Anything that hasn’t been played with in about three months should probably get the ol’ heave-ho. Find a children’s home or shelter that would enjoy giving them all a second life.

Home Office

Toss old chargers, obsolete phones, outdated discs, dead batteries, dried-up pens, and mystery cords. Recycle old papers, receipts, and business cards. Decluttering your work area leads to a happier, more productive workday!

Garage or Shed

There’s pretty much a guarantee that there’s old paint, oil, or other chemicals lying around in your garage. If they’re past their prime, they’re just taking up valuable storage space. Learn how to dispose of these items properly. Move on to unused or broken tools and sports equipment. Deflated soccer balls? Gone. Rusty beach chairs? Out. Bikes that have been outgrown? Bye bye! Make a point to go through your seasonal decorations if you have time. Donate what you don’t love or haven’t used in a while.