Westcoe Realtors, Riverside California…Boy, is the subject of today’s blog pertinent in today’s real estate market where the seller is driving the bus. Most everyone gets that this market of low supply and high demand has created a “seller’s monster” when it comes to purchasing a home. For years, the buyer had all the leverage as our real estate market plunged like necklines on a New York fashion runway, but now…seller’s rule the roost and they are having their way with buyers. You can’t really blame them since they have been on the other end of this equation since 2007, so instead of fighting the market, we thought today we would help buyers cope with the market.
First, these ideas below are geared towards the highly competitive market of today, and as the market changes, so will our rules…but they work for now.
Secondly, we will also assume you are trying to buy a home in the “bread-basket” of pricing, meaning what you want is what most everyone else wants, so you have a ton of competition. In our Riverside area, this would mean a home priced at about $350,000 or below.
Thirdly, we will also assume you already have a real estate agent in whom you trust…and if not, then get one. We of course will recommend ourselves, but if not, no matter…but you cannot navigate the purchasing waters without a professional you believe in.
Now…what can you do to increase the odds your offer gets accepted over all the others?
1. Pre-qualification vs. pre-approved for your new loan. Pre-approved for your new loan means that you are totally approved by your new lender for your loan, and all you need to close the escrow is a home to buy, and an appraisal on said home. Pre-qualified can be anything from fogging a mirror for your lender, to actually having the lender do some work on your file…but understand that for most real estate agents, a “pre-qual” letter is like cotton candy…it looks good, but there is not much when you take a bite.
Therefore, when your agent presents to the seller’s agent a “pre-qual” letter, expect it to be treated with all the excitement of a root canal. EVERYONE HAS A “PRE-QUAL” LETTER, so why would you do what everyone else is doing? Isn’t the idea to be different than all the other buyers you are competing with?
However, if your agent gives the seller’s agent a letter that says you are totally approved for your loan, your credit has been verified, your money has been checked, and the only thing holding you up is the house you will buy, now you have the seller’s attention. This takes a little more up front work on your part, but such is the nature of the beast when the seller is calling the shots….so get pre-approved, not just pre-qualified.
2. Write a letter to the seller telling them about you and your family. Trust us on this…if the seller is in the home (not a rental, or an investment company, or a repo, or a short sale, etc.), most of the time they want to sell to someone who will treat their home well, appreciate it as they have, and be good for the neighborhood..so tell them so. The seller most of the time has neighbors and friends they will leave behind, and therefore will want to do the best for those who remain.
No…don’t misunderstand us. If your offer stinks, or you are thousands of dollars below your competition, then no letter is going to offset that. But…if you are listening to your agent, and writing the type of offers you need to in this highly competitive market, then when all things are basically equal, the seller is looking for a reason to pick one of the offers, so give them a reason to pick yours.
Your agent can help you, but sellers and agents are people too…give them a reason to exercise some humanity.
3. Jump when your agent says to jump. Plain and simple…you are on the seller’s time frame, not yours. A great home well priced coming on the market on Monday can easily have half a dozen offers by Wednesday…so when your agent calls Monday at 10:00 am and tells you to make yourself available to see this home, you waiting until Saturday when it is more convenient for you will not cut it….unless you like living where you are and don’t want to move.
This is a very fast paced market at the moment, and you need to be ready to play…otherwise, you will get beat out by the other buyers who get this concept. Sounds cold, but it is real.
4. Waiving or limiting the appraisal contingency. Your new lender will require an appraisal on your new purchase, and the value of that appraisal needs to be at least your purhase price, or it will most likely mean the bank will lend you less money than you need. Now what?
In a “normal” market (one in which supply and demand are relatively equal…not like now), then usually the seller will understand and drop the price some so you can still get your loan…or perhaps the seller drops some, and you the buyer come up some, and the problem gets solved one way or the other.
In today’s market, where the seller calls the shots, and more than likely has had multiple offers to chose from, the seller will not budge if the appraisal comes in low…and they do come in low all the time because the appraisors cannot keep up with the rapid rise in prices.
So…if you have any extra cash, you may need to let the seller know that if the appraisal comes in low, you will be willing to pay the difference (up to a point) in cash. This will let the seller know you are truely commited to making this sale happen, and it might be the last thing needed to get your offer accepted.
Now…understand, not all people have the extra cash needed to do this. Everyone has a limit on what they can spend, so don’t get crazy if you can’t do this. All we are saying is that it is being done by some out there, so if you have the extra cash, and really want the home, then this is what you may have to do…and if you don’t have the extra cash, then it may take you longer to get the home you desire. Every situation is different, so get with your agent on this.
In the end, we hope the above items are helpful for you in your search for a new home. We get that this can be a very frustrating process, but it is worth it, so hang in there…and we will repeat what we said earlier…make sure you have an agent you trust, because as you can see, this is a highly flexible situation that requires a high level of trust between you and your real estate represenative.
Good luck, and as always, thanks for reading our blog.