It’s a great time to buy real estate — really. I know the real estate world was touting that line in their marketing campaigns a couple year back as prices were plummeting and tax credits were being offered to first time home buyers. I didn’t really buy into it then. I truly believe it is a great time to buy now. I’m confident we have seen the bottom of the real estate market and are well into the beginning stage of recovery.
There are challenges in purchasing in today’s market. With inventory low and demand high, multiple offers are common place – especially in the Orlando area market. On top of that, cash is king and as of late nearly half of all real estate sales were cash deals
What does that mean for the average buyer, dependent on financing, and ready to buy? It means be ready to act, swiftly and with precision. It means stay positive and keep in mind that everything happens for a reason. It is possible for a first time buyer to beat out the hedge funds, investors and others with deep pockets. It may take a little more time and the possibility of being out bid a couple of times before securing a home exist. (This is where staying positive and knowing everything happens for a reason comes into play. If the winning bid wasn’t yours, then there is a reason that house was not meant to be. I am a strong believer in this and have seen this theory proven first hand time and again.)
I have had a number of buyers beat out cash offers – strong cash offers. It is being done, and I am about to tell you how.
First and foremost, make your first offer your strongest offer. Agents are not required to disclose whether a property has multiple offers on it. Don’t assume yours is the only offer, and don’t assume you will be given an opportunity to negotiate. It’s quite possible you will not be given the chance.
Often times I have seen buyers disappointed that their offer was not the winning offer. I have heard the phrases, “I should have gone up $5000” more times than I would like to count. Honestly, $5000 in the grand scheme of things will not make a whole lot of difference in a mortgage payment (maybe $20- $30). It could make the difference between an offer being accepted or rejected. Knowing you gave your all should provide comfort if your bid is not the winning bid. This was you know you gave your best and don’t keep yourself awake at night wondering “what if” or “would’ve should’ve could’ve.”
Strongest offers also include things like strong escrow. Your good faith deposit needs to be attractive. (1-2% of the purchase price is customary in the Orlando area market). Putting $500 or $1000 down on a $100,000 purchase does not say “I am a serious buyer” to a seller. Putting $3000-$5000 down speaks a little louder. (Keep in mind this good faith deposit, your escrow, will be applied to your down payment and closing costs. It is all going towards your cost to purchase anyway.)
Strongest offers also include things like reasonable closing times. If the house is vacant, the seller will likely want to close as soon as possible. If it is a short sale, you have a better chance of the offer being accepted if you agree to wait for short sale approval for an extended period of time, say 100-120 days instead of the customary 60-90. If the house is occupied and it is a traditional sale, try to find out how much time the seller would like to close. If you aren’t able but notice there is a lot of stuff in the house, giving 60 days to close could make the difference since the idea of packing up an entire household in 15-30 days could be a little nerve racking for a seller. Not everyone likes the idea of a quick close. Tailor your closing date accordingly.
Strongest offers also include few contingencies or short contingency time lines. When writing an offer, the less you ask for, the more attractive your offer is. Get inspections out of the way in 7-10 days. Do not ask for a Home Warranty just because you can. Do not ask for the seller to contribute to your closing costs if you don’t need the help. If you do need the help, don’t ask for more than is necessary. Keep it simple, keep it clean.
Another way for buyers needing financing to find success in today’s market is to seek out homes where owner-occupants have the first right to purchase. Being able to cut a big chunk of the competition out of the game is definitely a plus. Homes with First Look Initiatives and Neighborhood Stabilization Programs (NSP) give owner-occupants (not investors) the first right to purchase within a certain time frame – usually the first week or 2 the property is on the market. Often times, these homes are in good shape and move in ready. Granted there will likely still be competition; not nearly as much at there would be if investors were able to bid.
Lastly, be prepared to pay a little more than market value. I would never counsel a client to pay an outrageous amount over market value. Sometimes the need arises to pay a couple/few thousand more than appraised value. If you love the house and have the ability to do it, do it. Often times paying a little more now is worth the time and expense of having to start all over again in the home search (including paying for home inspections and appraisal.)
Allow yourself some wiggle room as well. If you are qualified up to $150,000, you may want to limit your search to properties up to $130,000 to start. This could give you the cushion you need to have a little more offering power.
In conclusion, multiple offers can be challenging. Patience is required. Having the ability to act fast when the right home is found is crucial. He who hesitates often times loses in this market. Be ready to act. Get qualified with a lender before you look at houses. Know your budget, keep it in mind. Do not stretch yourself beyond your limits but be prepared to stretch for the right house.