The world of real estate has changed again. In January of 2009 Portland so many homes for sale it would take 29 months at the rate of sale of that time for them to be absorbed. Now the tables have turned. We have enough listings to last only 3-4 months. We are back in a seller’s market and that means more and more multiple offers on properties. The Jackson Group had multiple offer conditions on 48% of the homes we sold in 2012 and so far this year that ratio is up to 60%! It’s a huge reversal in the market trend from a year ago. As a result, we now help our clients prepare for the multiple offer probability up front so they can win, whether buying or selling! Are you shopping for a home? If so, here are some tips for how you can be ready when the competing offer situation happens to you.
1. Get Prepared
Get good professional help and get ready. Would you go to a live auction as a lone ranger? No way. You’ll need a savvy real estate broker to guide you, step by step, and hold the role of the central process point for all activities. This person will help you search for and select and value homes, advise on offer terms, recommend a team of inspectors and what kind of inspections are needed, coordinate the inspection and due diligence process, recommend and coordinate docs with a lender, the appraiser and title officer, provide referrals for repair companies, movers, cleaners and a million other resources. You will want a trustworthy counselor to take you through all this. Someone you will get to know well and with whom you can talk through the all the choices and decisions that you confront along the way.
2. Learn the market
Sometimes people walk into an open house, fall in love with a house and buy it even when they never planned to move. It happens, but rarely.
Here’s how it really works. You plan a move for a reason and get prepared by learning the neighborhoods, home styles, features and communities you like and why. You look at a lot of homes to “try them on” and doing so helps you find the one with just the right fit and features you want. You must do your legwork, touring homes and learning about neighborhoods. Make it a project and have fun doing it! There’s enough potential stress in moving already; doing your homework helps minimize the anxiety. When you find the right place, you’ll know it and you’ll trust your judgment.
Get Ready and Win!
3. Be early and decisive
Odds are it pays to start early, act quickly and persist! Practice making decisions as you look at homes. When you tour a group of homes, always pick the best. Notice why it is the best and learn what matters to you most. Preview property online and in person and watch to see what they sell for so you learn what sells, how much it sells for and what attracts more offers – is it style, condition, location, etc.? Assess the pluses and minuses of properties and ask yourself how many times since you started looking you have had an equal or better opportunity. As you get more informed, go see houses as soon as they come on the market. The good homes sell quickly!
4. Use technology
There are great tools today to help you learn about real estate, search for and find properties for sale, communicate with brokers, lenders, inspectors and other professional helpers in the process and share your discoveries and new knowledge with your friends. Use that smart phone to your advantage for speedy notification of listings, ready online property information, getting questions answered from your team, producing/signing/delivering documents and sharing your progress with friends.
5. Know your limits and your priorities
The process of learning about homes, neighborhoods, schools and other issues important to you is all done in the context of your budget, your timing and your list of “must have” vs “preferred but not essential” features. As you study homes and the market you’ll see what sells and you’ll be honing in on what matters most to you. Discuss this with your broker, especially if you are having trouble coming to decisions or finding good opportunities. Choosing a home is, in the end, choosing your compromises. To be prepared to make confident decisions in a competitive situation you must have tested your priorities in advance.
6. Become an expert at assessing value
Learn to “value” a home, not price it. Cheap homes are cheap for a reason, one that you want to avoid, unless they have been purposely under-priced to create the auction. You wont’ recognize this situation unless you learn to discern value. What makes a good house a good one?
When you see a good home, decide what price you would regret not having paid to own it if you had to compete. Ask yourself that question as you tour homes and learn values. Watch how fast they sell and ask yourself, would you have jumped on that one, or let it go. Why? You will begin to notice what distinguishes the good homes from the ordinary. For more on this check out our post on “What Makes a First Class Home?”
7. Write a winning offer
Begin with a personal note, preferably hand-written, to introduce yourself. Sellers like to know who they are working with and selling to. In our fast-paced, high-tech market today, with social media, DocuSign, email delivery and text messages to communicate, the process can seem impersonal. So, build in a personal touch that can set you apart from other offers. Use this letter to tell the seller why you love the home, how you have prepared for just this moment and how you are committed to working with them for a smooth transaction. Your goal here is to build trust and develop a personal connection. This may be just what sets your offer apart and it will surely be worthwhile for maintaining good will and cooperation as you go through the process.
You’ve been preparing for this moment, so write a clean offer showing you are confident and ready to buy. Have your inspection team lined up including having a clear plan for what issues you want to check out. Have your loan pre-approved, and that means not just a conditional letter but a full credit approval signed off by the underwriter. Be prepared to move quickly and decisively with conditions to give the seller security, then be flexible with the dates for moving and possession to offer the seller greater convenience. Discuss the merits and pitfalls of “Escalation Clauses” with your broker in advance so you know where you stand on this strategy.
8. Get good professional help
Did I say this already? Well, here it is again! Find a good broker and plan together what the home shopping process will look like for you. Look for a broker with proven accomplishments with other clients. How many homes do they sell per year? What neighborhoods and property types do the specialize in or know best? What resources do they have for special situations? What communication skills do they demonstrate?
With your broker, put together a team of professionals who will fill different roles in the process. This includes, at a minimum, an experienced lender and various inspectors who your broker knows to be knowledgeable, competent and reliable. It means meeting a few brokers and looking for the right “fit”, seeking recommendations from friends and family and looking at reviews or testimonials online.
When the multiple offer situation occurs you want a broker who is seasoned in the market and has been through the process many times. Someone who can advise you on the competitive situation and recommend strategies for success. Someone who can speak your story and present your offer to your advantage. And someone who can establish and build rapport with the seller and the seller’s broker. A strong identity of trustworthiness is key!
When you find the home that you love, the one that has your name on it, we hope it is there just for you and no one else. But to find and purchase a first class property in today’s market of low inventory just may mean you must compete to get it. Use these tips to give you guidance, confidence and peace-of-mind in a competitive situation.