Home Buyer: How in the world can I buy a home in this market?
Jeff Hansen, Realtor in Colorado: Here’s how.
It is a crazy market out there! Crazier than I have ever seen in my over 22 years in the real estate business. You have heard the stories I’m sure. No inventory of homes for sale and tons of buyers. That means bidding wars- and they seem to get crazier by the week! If you are trying to buy a home right now, you have, undoubtedly, run into this scenario; You find your dream home. You go to make an offer, only to find that home is the dream of a dozen more buyers. You put your offer in and before you know it, you were beat out by a boat load of other offers. You feel beaten and bruised and as thou you never even had a shot at that home. What now?
With the right information and action, this market can be fun! Without it, it can be terrifying.
Here’s what you must know. There are Realtors out there that have experience in handling multi-offer scenarios and then there are the ones that are intimidated by them and don’t know what to do if they are in competition with other buyers agents. You MUST align yourself with a broker that is skilled in taking the top position in bidding wars. How do you do that? Ask.
Too many buyers use the Realtor that is close to them. And by that I mean the one that is either a friend or a relative or someone they have used in the past. That is all well and good until you find that this agent may not have the proper experience to get the job done in a tough environment. They don’t have the skills to make it in a crazy sellers market. Maybe they do, if so use them. If not, find another one. Buying a home and making your biggest investment of your life is too important to let nepotism take the lead. Ask your broker these questions to determine if they are going to get you to the closing table.
1. What is your strategy if we are involved in a bidding war?
The answer should not be to present an offer and wait and see. I will tell you now that this will fail.
The answer should be that they are being proactive to the scenario by presenting a “dynamic offer”, one that changes on the fly to stay viable throughout the bidding war. How is this done? By adding a clause that keeps changing based on other active offers. This is called an Escalation Clause. Quite simply, you stay ahead of every other offer as the flow in. It is written in such a way that adjusts the offer price up to stay ahead of the other prices. If your broker does not know how to use an Escalation Clause, Find one that does.
2. What are your plans of locating a home for me?
In today’s housing environment, at least here in the Metro Denver area, almost all homes priced under $400,000 are experiencing bidding wars. The sold prices are actually exceeding the list prices! In some cases by 10-15%! All of the homes that I have listed this year have sold for over asking as the bidding wars heated up. That means your Realtor should have a plan for what price range to search in for you. If your lender says you can afford up to $300,000, your agent better not be showing you homes priced at $295,000 to $300,000. More like $275,000 to $285,000, tops. Be prepared to spend more than asking and have to come up with the difference in cash. Talk to your or an agent about why this is soooo important. If they don’t know why this is incredibly critical, find another agent!
3. How long have you been selling in this area? Do other brokers know you, respect you? How can I be sure?
The last two listings I sold went to a bidding war and the numbers and dates ended up very close at the end. Which offer did the sellers choose? The one with the reputable broker involved. Experience matters people! I cannot express that enough. There have been cases in my career where the offer price was a bit lower on one contract but the broker had clout, so the sellers chose that deal. You have to think ahead and be certain your broker can get you to the closing table.
This should get you going in the right direction. Stop being terrified of this market and go have fun! Need more help? Contact me and I will be there. If your broker isn’t passing muster, others can… I can.
Happy house hunting.
Here we discuss multi-offer scenarios on the selling side.