In yesterday’s post we discussed various ways for a seller to handle a multiple offer situation on their property. In today’s article, we look at the other side of the transaction. As we all know, the current real estate market has the following dynamics contributing to increased competition for buyers:
- Extremely low inventory of homes for sale
- Historically low mortgage interest rates
- Higher number of buyers in the market
- Pandemic-induced shift to suburban single-family homes
Buyer’s options
In an ultra-competitive housing market like we are seeing right now, it is critical to have a knowledgeable real estate agent representing you. This knowledge of the local market will greatly assist you with the amount and type of offer that should be presented. In some cases, it is obvious that a full price offer will be required to get a deal done. In other cases, you will need to craft an offer that is more reflective of the assessed market value assigned by you and your real estate agent.
Needless to say, an initial offer that is too low will likely turn off a seller and may very well simply be rejected with no counter-offer. On the other hand, a reasonable offer will likely be responded to by the seller. More times than not, the seller will counter with another price that may be between your initial offer amount and the listed sales price.
Highest & Best offer
In the current market, it is quite possible that the seller will be considering multiple offers. In these multiple offer situations, it is likely that the listing agent will inform all buyers’ agents that a “highest & best” offer will be due by a certain day/time. In these scenarios, a buyer will need to determine what amount he/she is comfortable (or approved to be) paying. One suggestion that we typically recommend to our buyers in this situation is to simply ask themselves the following question: “At what price would we not mind if the property sold to another buyer?” This is another way to determine what the maximum amount a buyer is willing to pay. By approaching it this way, it sets up a disciplined approach to the buying process. After all, it is always best to approach any purchase with a set of disciplined guidelines without emotional influence.
In addition to the maximum purchase price offered, other factors should also be considered when submitting an offer on a property. The saying “cash is king” can apply here as well. If submitting a cash offer with no financing contingencies is not an option, then you may want to consider including a higher amount for your initial deposit or decreasing the amount that is being financed. In addition, many sellers prefer to see an inspection period that is less than 10 days. Your real estate agent should have various options for a home inspection & typically these should be able to be completed within 7 days or so.
Summary
In closing, the current real estate market is extremely competitive. Buyers should be able to act swiftly whenever a property hits the market. Of course, the more prepared you are before your home search, the better. For example, ideally a buyer will have a pre-approval amount for a home purchase. Most selling agents will require this documentation to accompany any offer submitted anyhow. As with any real estate transaction, a knowledgeable and experienced real estate agent will greatly increase your chances of successfully getting a property under contract. Every market is different, so local knowledge is paramount!
