Buyer confidence is back, demand is strong and inventory is low. That puts sellers in a much different position than they’ve been in for years.
It’s no secret that it’s a great time to buy real estate – interest rates continue to hover at historic lows and prices are just beginning to rise. The market is definitely well grounded in the early stages of recovery.
The biggest challenge for buyers in today’s market - with demand high and inventory low – is the fact that multiple offers are once again commonplace.
Currently, according to the National Association of REALTORS®, there are 21.6 million existing homes for sale, down 13.6 percent from the same time last year. With fewer homes for sale – and more buyers in the market – many sellers are finding they have the upper hand when it comes to negotiating on price for the first time since the housing bubble burst.
A recent Century 21 survey of more than 2,000 Americans found that 33 percent of 365 people searching for a home have been on the hunt for more than a year and many are finding it necessary to make compromises on where they would like to live or the type of home they would buy in order to close a deal.
So, until more sellers are ready to join the party, buyers who are lucky enough to find the home of their dreams need to be ready to act – swiftly and with precision.
“I always do a mini-CMA when my clients are considering writing an offer, as a Realtor it’s my job to offer advice regarding pricing,” Ruth Long of Century 21 Pace Realty said. “I have a client who just got a home under contract after losing out on offers for two different houses. Simply because inventory is so low, it is becoming more of a sellers market. The mindset of going in with a low-ball offer and waiting for a counter just isn’t going to work. This particular client learned the hard way that they needed to offer what they think is a fair price the very first time around.”
Buyers definitely need to stay positive and keep in mind that everything happens for a reason. It may just take a little more time and patience to secure the right home when the possibility of being out bid exists. Once they do find the right home, it’s important to make that first offer their strongest offer.
“I recently put a listing on the MLS at noon one day, there weren’t even any photos yet,” Long added. “A showing scheduled for 11:30 a.m. the next day, and by 1:30 p.m. we had an almost full price offer from a cash buyer. That’s the kind of market we are in right now. Things are changing, and it’s going to be a very good year. For sellers, I can’t stress it enough, they should put their homes on the market now.”
In the meantime, buyers cannot safely assume that their offer is going to be the only offer. Chances are, if the property is in a desirable location, in good condition and priced right, they will not have the chance to negotiate. According to the Century 21 survey, 42 percent of the people shopping for homes have placed offers in the past six months, yet only 11 percent of the bids were accepted.
“We’re not only seeing multiple offers, but some offers are now above asking price - you really need to write your highest and best offer the first time,” Linda Zyla of Century 21 Alliance Group said. “I had been working with a buyer in St. John for 30 days when we walked into a new listing for the first time on a Thursday and again on Friday for a second time. The seller happened to be home and mentioned that there was another showing scheduled later that night and two more the following day. We immediately wrote an offer, my buyer made a great offer just over list price, and I went the half block to deliver it to the listing agent’s office. While we were in the process of getting the deal done, two more offers were made.”
Often, when buyers are disappointed that their first offer does not come out on top in a multiple offer situation, they regret not going a bit higher. In the grand scheme of things, even $5,000 will add as little as $20 to a monthly mortgage payment with today’s low interest rates. When such a small amount could make such a big difference, it’s important for buyers to go in strong, with their best offer, leaving no room for wondering “what if” or “woulda, coulda, shoulda.”
As a result, the Century 21 survey shows some buyers are rethinking their positions, with 85 percent saying they are now more willing to compromise on things like being more flexible with closing dates, purchasing a home as is or adding a bit more cash to the deal than originally planned. In addition, according to Zyla, we’re seeing a growing number of really strong first-time buyers in our area who are thinking about the long-term, who are not willing to settle, and that can change the whole negotiating process.
“These buyers want bang for their buck, they want a home that’s going to hold it’s value and for the most part, one that’s not a project but turnkey,” she explained.
“I think people in general are tired of not seeing what they want, or properties that are not priced correctly. We just don’t have enough inventory right now. I don’t know where all the sellers are. I sell in five counties, and it’s the same all over. Interest rates are not going to stay this low forever. While some people may be payment driven, smart buyers are cost driven. They don’t want to overpay in the long run, that bottom line price is more important to them. You can buy so much more house right now. For example, you can go from a $150,000 mortgage to $200,000 with very little change in payment. But, add just one point to that and you’re at about $185,000, add two or three points and you’re around $170,000.”
While multiple offer situations can be challenging, buyers with patience and an eye on their budget – those who are pre-qualified with a lender before looking at houses – will be ready to get their deals done when the right home for them hits the market.