Your Home: The joys, and trials, of a multiple-offer situation

Question:How would you handle a multiple offer situation?

Welcome to the seller’s market! Going once…twice…SOLD!

Multiple offer situations are the gift of the seller’s market. A gift for the sellers, that is. Although, sometimes a multiple offers situation can turn against the seller. Let me explain.
There are no clear guidelines for multiple offer situations. They can be handled pretty much anyway the seller wants. That said, I am a firm believer in putting good “real estate mojo” out there so you will get it back. My job is to protect the best interest of my selling clients, and sometimes a bidding war to the “highest and best” is not in their best interest. Even when a buyer emerges the winner of a bidding war, the emotional roller coaster can end on a down note. Often, buyers will experience buyer’s remorse or will have an expectation that since they paid top market value for a home it better be in top market condition. Therefore, the inspection process could be a little painful for the sellers. Or in the case of buyer’s remorse, the buyer might back out after discovering the true condition of the home.

So how should you handle these situations? If there is one thing that I have learned as I have gotten older, it is that “should” questions are tricky to answer. But if you are asking, I will share my thoughts.

My coaching to sellers, in all situations, really, is to handle the situation how you would like it to be handled if the roles were reversed. So if the seller were the buyer, how would they like to be treated. Recently, I had a situation where my sellers received three offers their first day on the market. All three offers were very close in offering price. One offer, however, went slightly over asking price. Additionally, they provided strong financing and a letter explaining their passion for the home. Now my sellers could have gone to all three offers and asked them to give them their highest and best to squeeze a little more out of the buyers. Instead they considered all three, and accepted the offer that went slightly over asking price because they had already exceeded the market’s expectation for a sales price. That is what I call good “real estate mojo.”

I would be remiss in my responsibilities as a Realtor if I did not speak to the buyers out there. Please consider that your first effort in a multiple offer situation may be your “one and only” opportunity. If you are passionate about the home in question, don’t hold back! There is nothing worse than losing out and knowing that you could have done better on your offer.

Conversely, even if you are the buyer with the winning bid, you are not the only bidder with a passion for the property. There could be back-up offers waiting in the wings if you change your mind or simply to be used as leverage by the seller during inspection negotiations. Sometimes just winning the bid has to prize enough!

Your Home: When is the best time to sell a home?

Question: When is the best time to sell my home?

Oh, how I wish that I had a crystal ball to predict the real estate market. I would certainly be a wealthy man — and quite popular, I might add. Unfortunately, no such crystal ball exists. And I say that all of the time. People always ask me, “What do you think the market will be like in the fall?” or, “If we wait a year, will be able to sell for more?”

My typical response is that I don’t have the power to predict the real estate future. Sure, I can acknowledge current trends and speak to seasonal trends of the past, but as we have learned through the shift in the market, values are a moving target.

So let’s talk about timing. The first contributing factor to affect the timing of selling a home is seasonality. Here in beautiful Kansas City, we have a pretty predictable pattern when it comes to home sales. January starts the year out timidly. Typically the homes sales increase by about 20-25 percent from January to February. Then maybe another 15 percent from February to March. As most of you would predict, April and May are really strong months. This is the heart of the spring market. Flowers are blooming and home buyers are hitting the streets. At the same time, home sellers are doing some spring cleaning and listing their homes. Over the last six years, the inventory coming on in the spring has far exceeded the number of active buyers. As a result, the market stalled and we would have a short spring season.

Not this year. This year the inventory cannot keep up. Homes that are priced right and in great condition are being gobbled up. The average days on market in the Prairie Village area right now is 67 days. This same month last year it was 92 days. And the supply of homes is down over 38 percent Unbelievable! The number of homes that sold in March is up 32 percent compared to 2012. Sounds like a good time to sell to me.

The next factor when it comes to timing is affordability. I recently shared with you that affordability at the end of 2012 was at 12.9 percent (an all-time low). Several things affect affordability, but let’s focus on one for this column: interest rates.

Some sellers don’t realize the impact that interest rates have on their chances of selling. Let me give you an example. When we consult our buyer clients, we teach them that for every 1 percent interest rates go up, a buyer will lose on average 10 percent of their buying power. So if a buyer’s max purchase price at 3 percent was 250K, then at 4 percent their max purchase price would be 225K. So if your home is listed at 250K, the market just took away a potential buyer.

Don’t underestimate the power of interest rates. Additionally, please don’t fool yourself into believing that the investors behind our mortgage industry are going to allow rates to stay so low. After all, they are in business to make money. Last week we talked about the strong signs of our housing recovery. These signs are not a secret. Rates will go up. Mark my words. Please don’t wait it out.

To tie it up with a pretty little bow, it is always a great time to sell a home that is priced competitively in relation to its competition and its condition. The only real estate market that we interpret with 100 percent accuracy is the market of today.

Your Home: How long does it usually take to find the right home to buy?

Question: How long does it take to find a home these days?

Length of Search Process

I wish I could offer a short and concise answer … but, boy, this one has several variables that affect my response. My intent with this column was to cover some “non-market condition” topics. However, in real estate, every answer to every question will be determined in some way by the current market conditions.

For example, I have shared with you in my most recent columns that in most areas of town, we are in a seller’s market. A bright and beautiful Realtor (my wife, Leah) made a great observation earlier this month. She said that it feels like there are three buyers for every home on the market that is priced right and in good condition. Leah is our Lead Buyer’s Specialist so she has had a first-hand taste of today’s market.

In a seller’s market, “the hunt” may be over very quickly, or it could take quite a while. It depends on how specific your criteria is for a home. If you have a long list of non-negotiables, you may have to practice quite a bit of patience in a seller’s market. Also, with inventory at one of its lowest points in years, a buyer does not have time on his/her side. You have to be prepared to pull the trigger immediately. I know the thought of writing an offer on a home the second it comes on the market, or getting into a bidding war for it can be a scary thing for some buyers. My best advice is to stay informed. A highly educated buyer will be more prepared to make the right decision at the right time. Please keep in mind that once under contract, if financing is being obtained, it will take at least thirty days to close on your new home.

Statistically speaking, in 2012, buyers spent 30-40 days looking at real estate online before contacting a Realtor to actually show them homes in person. Once our team is contacted, one of our first steps is to schedule a buyer’s consultation. In this meeting, our team performs a needs analysis to identify exactly what style of home a buyer is seeking, in what area of town, and in what price range. Then we share the current market conditions and discuss the steps in the overall buying process. A properly executed buyer consultation will set a buyer up for success and set their expectations appropriately. We find that buyers with appropriate expectations enjoy the home search process. They know what to expect and why. I was told a long time ago, “Never surprise your boss.” Boy, was that good advice!

Please keep in mind that once under contract, it will take at least 30 days to close on your new home if you are obtaining financing.

This spring, we have had clients purchase the first home we showed them. We have had others who have seen quite a few more than that. Our ultimate goal is to find the right home for them. Notice I did not say the “perfect home.” That is because there is no perfect home. They are all imperfect. In time, however, the memories made there will get it as close to perfect as possible.

Your home: Are homes finally appreciating again?

Question: Are we seeing appreciation of home values yet?

Well, it is now April and we are in the heart of the spring real estate market. Flowers are blooming, snow is melting away (finally), and, yes, appreciation is on the horizon for many of us. That is not a casual statement. I, like many homeowners, don’t take appreciation for granted. Especially after the last six years.

Let’s talk about the evidence that tells me appreciation is headed our way.

First, home prices have stabilized. In many areas of town, the average median sales price has actually increased compared to this same time last year. This stabilization of home prices is the foundation for a true “housing recovery” and consistent annual appreciation. Stable values coupled with low housing inventory is a very simple equation for appreciation. As supply stays low or even decreases, demand will intensify.

The second evidentiary point is the stabilization of the mortgage industry. For a while there, the banks were telling a different story almost daily. Buyers went from being “bona fide” one day to no longer able to obtain financing the next. Additionally, appraisal requirements kept getting tougher and tougher. The investors behind the loans wanted to make darn sure that if the buyer was to default, the investor could make his money back. Though understandable, it felt for a while like the lending industry was holding back the recovery. Of course, there were a lot of contributing factors and we all played a part.

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The good news is that lenders ARE lending and although the process is more detailed now because of new guidelines and restrictions, the money is flowing. On top of that, rates are still at record lows. It appears that the mortgage industry and its investors are now comfortable with the “new normal” and it is “game on” for them.

The third step to housing recovery is actually the unemployment rate (now down to 7.7 percent). As job security returns and job opportunity increases, buyer confidence increases. It makes sense that when buyers are gainfully employed and have no fear of losing their job, they are more comfortable purchasing. They are also more comfortable with the thought of paying a higher price for a home in an incling market, thus supporting the notion of appreciation.

I referred to the new normal earlier. The new normal, as predicted by most real estate news sources, will not have the rapid trajectory of appreciation that we saw in the late 1990s and early 2000s. Our market has been corrected in a sense and should now consist of steady appreciation that will keep more in line with the cost of living. This will allow more buyers to buy in the absence of skyrocketing home values. What is the old saying? ”Anything in excess is not good for you.” The same applies to home values. The new normal is good for us all.

image credit: Keller Williams Realty International