Friday, March 19, 2021 / by Dave Salzman
So, you have found the “perfect home” and you are writing your offer. Market conditions mean that you will likely be one of several offers!
How to get your offer selected above these many others? In other words, how do you “Get your offer on top of the pile?" We have specific techniques that substantially improve (but of course don’t guarantee) your odds of a successful bid.
But is it critically important for you to take these important preparatory steps BEFORE you write that offer.
What is driving the appearance of low inventory is the rapid sale of inventory? Homes are getting snapped up in days instead of months and sellers are realizing increased sales prices due to the crush of buyers vying for any one purchase opportunity.
However, it is important to understand that the number of properties that came on the market “Active Sales” status has been almost the same quantity. And those that went under contract “Pending Sales” status have actually increased in quantity in Los Angeles County as compared with the same month last year. About the same number of homes reached the market, and more went under contract, as an example, in February 2021 than did in February 2020. There is actually plenty of inventory-it just trades extremely rapidly!
The “flow of home inventory” to the market is strong so this is not the limiting factor in your purchase.
If you would like to know why market conditions are so “inventory limited” in appearance and how, in actuality, that is a buying opportunity, check out the prior article in this series: Multiple Offer Madness Understand the Metrics.
To our frustrated buyers, we do not recommend waiting, but we encourage patience! These historically low-interest rates, while up some since their recent lows, are not likely to increase dramatically for some time per the Federal Reserve. Additionally, the confluence of the Millennial 1st time home buyers, Gen X move-up buyers, and Boomers “right-sizing” mean the buyer pool has exploded. These factors, coupled with the COVID-19 demand for more “elbow room”, and low-interest rates have created a frenzied race to homeownership.
How to maintain your sanity, still achieve a purchase and not have buyer’s remorse? Proper planning can tame the frenzy and frustration.
The following are our first 5 steps to help you maintain your sanity, find the right home, and “Get your offer on top of the pile.”
1. Identify your “Must Haves” vs “Desires”
Understand and write down the top ten “Must Haves” in a home and location. This is especially important if you are purchasing with a partner/spouse. The very act of making a list (separately at first) and then reviewing and comparing your lists into “Must Haves” vs “Desires” creates clarity and is your touchstone with each property you view. Take your list with you. If the property does not line-up, pass.
2. Research Location
Identify what geographic area that works for you. Apply your “Must Haves” to a city and neighborhood. Start broad with internet research and then dive deeper into the target city. For resources, check the Chamber of Commerce to see how businesses are supported and promoted, the School District to understand locations and scoring, local activities, restaurants, shopping, medical facilities, natural features, access, and driving times. If you live far away from your desired destination, take a trip, drive around the neighborhoods, stay for several days or a week.
3. Be “Preapproved” not just “Prequalified” for a Loan
If you need a loan to purchase, be prepared. Establish a lender relationship (We can assist with vetted referrals) and review preliminaries so you can establish your affordability factor. When you have the comfortable price range for your purchase bracketed, do not stop there. Get the process underway to apply for the loan. You want to be in the position of a Pre-Approved buyer so that you can be competitive against any other cash offers.
4. Understand your Post Purchase cash budget for renovations
Are you a fixer buyer? Or, due to down payment and cash constraints, will you need a “move-in ready” home? This must be understood so that you do not buy a property that is a fixer, and then find you do not have the extra cash to fix it up post-closing. If you are a fixer buyer, you must understand the cost of the fix-up program right upfront. To not “overpay” for a home you need to understand the “as-is” value of the home, how much-desired renovations will cost and the ultimate question is “what will it be worth post-renovation”? You do not want to overpay for the “as-is” and then pay more just to make it comfortable to live in the home.
5. Consult a local Realtor
Real Estate is hyper-local. There can be a difference in values, conditions & schools sometimes with just one block separating homes. In the Beach areas, as an example, the price range within a 2-mile range of the beach can vary by hundreds of thousands, to millions, of dollars. Each neighborhood has its personality and no one neighborhood is right or wrong. . . you only need to find the one that is right for you. Also, the “Art of the Offer” is nuanced. It is, of course, price - but it is also how terms are written, the give and take of a counteroffer, the Realtor’s research regarding the property, and its condition that will support your purchase.
In the Greater South Bay our team is positioned to provide excellent service - please reach out!