Categories: For Buyers
I’ve been in this business for a relatively long time. Compared to most agents, an extremely long time. So I can remember the days when competitive home buying was the norm. Well, those days are back and it feels like 2005 all over again.
It has happened at least three times this past week that buyers I’ve been working with were interested in properties. They ask to see something only to be told there are no more showings. They ask to make an offer only to find out that there is already an accepted offer. They make an offer and find out there are three more offers the next day and that the seller is conducting “final and best”. They call me to ask if they can submit a higher offer after final and best has been held. They email me to ask how something can already have an offer and acceptance if it just hit the market a few days ago.
So I thought it appropriate to write a bit about the current competitive home-buying environment in which we find ourselves again today.
THE EARLY BIRD CATCHES THE WORM
The first buyer to get into a property has the best chance at buying it. Occasionally, a listing agent will tell his or her buyers about the unit before it even hits the MLS. This is wonderful for the listing agent, who then gets to keep both sides of the 5 or 6% commission.
If your agent is smart and diligent, you should be getting emails of new listings as soon as they come out. You need to make time in your schedule to go see these properties right away. Not over the weekend, not next week – right away. Tomorrow.
If you see something you like, make an offer. If you think about it for a week, someone else is going to beat you to it. Thanks to our statutory attorney review process, you can always withdraw the offer if you change your mind. But the first offer usually wins the bid because most sellers will respect that that buyer was first.
Make a strong initial offer. The ‘low-ball’ mentality is a thing of the past. If a property in Hoboken is priced correctly, it is going to sell quite quickly. Thinking you can make a low bid and “get a deal” is simply not realistic any more.
MULTIPLE OFFERS – IT’S UP TO THE SELLER
Increasingly, buyers are confronted with multiple offer situation. So how is that handled? Well, it’s the seller’s property so it is up to the seller. Some sellers get a really good initial offer (see above) so they tell the buyer they will stop showing the property. Or they will agree to show it only for back-up offers.
Some sellers keep showing and will accept bids all the way through attorney review – remember the contract is not binding on either party until the end of attorney review. If something better comes along they may see if the first buyer will meet it or they may do “final and best”. Final and best is when everyone who is interested has a chance to submit their best offer by a given deadline.
NO YOU DON’T KNOW WHAT THE OTHER BUYERS BID.
My buyers often ask me what they are bidding against. I never know and the reason I don’t know and they will not know is because the seller does not wish to disclose the competing bids. They certainly could, but they never do.
Sometimes, the listing agent will tell me “we got a very strong offer” or “we got close to asking” or “we are already at asking so your buyer will have to come in over asking” or “we got all cash” so we have some idea what we are bidding against. In all the years I’ve been selling real estate, I’ve never been told more than that. Some buyers feel like they are then bidding against themselves. Well, you are but so is the other buyer. Bid enough so that you won’t be disappointed to learn that you were out-bid by $1,000.
THERE IS NO INVENTORY ON THE MARKET
Demand is strong and listings are almost 40% less than they were a year ago. There is nothing for sale. That means that the good ones get snapped up instantly. I don’t foresee any reason for this situation to change any time soon. In the three bedroom and brownstone market, it’s even worse. So get used to it. It’s the new normal.
HOW TO MAKE YOUR OFFER STRONGER
Bid fast. Bid high. Have at least 20% to put down – more is better. Have a current pre-approval letter from a local lender. Be ready to close quickly (30 to 40 days) if it will help the seller or be flexible and stay where you are longer (maybe do a use and occupancy agreement so you can close but the seller can stay on) if the seller needs to buy. Don’t ask for a million concessions. Do ask to have all further showings be only for back-up. Think about waiving the mortgage contingency if you really love the place and could pay cash (but this requires some careful consideration). Don’t negotiate inspection issues prior to the inspection.
WHAT TO DO? BE PREPARED!
There are a few steps to take to make it more likely you will get a property. First, work with a really good, experienced agent who knows how to handle these tricky situations. Second, have your financing lined up. Know who you are using for your loan. Have a local real estate lawyer ready and willing to represent you waiting in the wings. Demand that your agent get the condo financials or at least know something about the association standing and financing as soon as you make an offer. Find out the renter/owner ratio when you view the property. Know how much commercial space is in the building, if any. Know if the floor insurance is adequate from the start. In other words, be very pro-active in getting the due diligence process underway so you don’t invest a lot of time and effort on the wrong property.
These things have a momentum and being fast out of the starting gate and continuing to run strong will help you get to closing – the finish line.