Its' been a crazy month
It's been a crazy month for me and I haven't had too much time to just sit and write. It's been crazy but good crazy and I can't complain about the real estate business.
This month, I'll have 6 closings with a mix of buyers and sellers. Woo Hoo!
But it's been stressful because each of these deals has been a challenging closing. This usually happens when the market is skewed to one side of the transaction. Today, it's a seller's market. And when I say a Seller's market, I'm not saying it's leans towards a seller's market but the needle is full tilt towards the seller's side of the sale. Sellers can demand top dollar and favorable terms.
That's great if you have sellers as clients. And, luckily half of my closings this month are seller clients. You would think that this would make this part of the transaction easy but in reality, the one sided market causes problems even when you represent the sellers. For example, I had one buyer write an offer on one of my listings at Fireside @ Desert Ridge receive an offer within 4 hours of the home going live on the MLS. You would think that this is great! In this case, the buyer wrote the full price offer just to lock up the house while they were looking for a better home in another neighborhood. They ended up backing out during the inspection phase of the escrow process. Luckily, we had a backup offer in place and this just delayed the closing by 2 weeks. Lesson learned on my part.
I don't think this market will slow down anytime soon. Of course, anything can happen and I don't have a crystal ball. Most of the buyers are well qualified, purchasing a homes as their primary residence and putting money down. This is all good news because there is less leverage in the real estate market. Less leverage means, less likelihood that the sellers will just walk away from their homes like they did in 2005. This all means that I don't think we're going to see a market crash anytime soon.
We may be in a long term bull market. Or at least in the markets that I focus on.
For my buyer's I'm asking them to be fully approved. Before you go out looking for a home, you should of chosen a lender, provided them with the financials, tax returns, pay stubs, etc. The last thing needed is a fully executed offer.
I'm working with two buyers right now that don't want to get preapproved. This is going to cause a problem. They won't get their offer accepted and / or this will put their Earnest Money deposit at risk due to financing delays.
On top of this, I'm going to let the buyer's know that in mid range / lower priced homes, expect to pay full list price or maybe even go above list price. This is just the market. With the higher demand, homes are going to sell close to list price. Trying to negotiate with a substantially lower offer will just result in not getting the home.
I know that this is going to upset some of my readers and potential buyer clients. My role is to write an offer that my client feels comfortable with and counsel them on the market conditions and what it takes to get an offer accepted. The appraisal will let you know if you're over paying for a home.
We may have to resort to other means to get the offer accepted...
Cash offer - work with a lender that can close in 10 days for a short term loan and then refinance 30 days later with a normal mortgage. This is how competitive buyers in California, Washington, Oregon submit offers.
Waive all contingencies after 10 day inspection period. In other words, rush appraisals, rush inspections and remove financing contingencies so that after 10 days, the Earnest Money is non-refundable for any reason. In other words, if the house doesn't appraise or you can't get financing, you would lose your EM if you can't close on the home.
Large Earnest Money deposits that are non-refundable after X days. This shows that the buyer is serious, less likely to back out and seller is assured that buyer's won't back out of the house.
Multi-counter offers - In this scenario, sellers ask all buyers who submitted an offer to come back with their best and final offer. Seller will then accept the best offer.
"$1,000 above next best offer" - for example, full purchase price shall be the higher of $500,000 or $1,000 above next best purchase price.
I'm not saying that the market will get to this point but the way the demand is right now, it may get to this point. It's a competitive market out there right now and your offer has to stand out against the other offers.
Let me know if you have any other questions.