Jim Valentine on Real Estate
When the inventory is scarce competition is inevitable. The current real estate market is lacking inventory often resulting in competing offers for the same property. One might think that cash rules the day, which it often does, but it doesn’t necessarily always win out.
Cash buyers usually want a “cash discount” meaning they offer less than asking price. In a competitive market the cash buyer will realize that the cash just makes him a contender, doesn’t give the right to discount, but it is tempting for them to try anyway. It depends on the property for in some cases loans aren’t able to be had and the buyer will need to get private money. Terms will help the cash buyer as we will discuss later.
If you are going to get a loan you can still compete, but you need to be prepared. Get prequalified by a bona fide lender and have your prequalification letter attached to your offer package. The offer can provide for you to submit it within a period of time, usually 5 days, but that isn’t in your best interest. Include it with your offer to get yourself in the game.
You don’t want to buy the proverbial “pig in a poke,” so you’ll want inspections, but watch the timing of it. There is no need to write a 21-day inspection period in an offer today, the inspectors are readily available. Make it quick. It is the buyer’s and seller’s best interest to have a disinterested third party, the inspector, scrutinize the home and provide a written report. Takes liability away from the seller as long as they aren’t hiding something that they know about and provides security for the buyer. Some buyers have been trying to compete by waiving inspections. Unless you have good construction or inspection knowledge and crawl under the house and look at the roof, you are taking a risk.
Inspectors’ findings are usually things that are unknown to the seller, or they would have disclosed it on their seller’s real property disclosure form. We’ve seen homes that look fine to the observer, but the inspector has uncovered tens of thousands of dollars’ worth of repair work that needed to be done. Few deals are so good as to be able to absorb that type of surprise. Time is another way to compete.
Don’t write a 60 days close of escrow offer if you are competing. What do you need the time for? The seller has multiple offers and won’t need to wait on the others that long. If you want to compete and are in a position to, shorten the time frames for things. Quicker inspections, shorter escrow close, i.e.- 15-21 days. That will help get you separation in the market, or at least to be able to better compete.
Make your decisions quickly and respond as the seller’s agent prompts you. If there are multiple offers, you may have to sweeten your offer. A recent multiple offer situation saw one high offer needing a loan and two cash offers just behind it, all more than $30,000 over asking. The difference between the two cash offers – one closed in 10 days, the other 21. Time is money. For perspective, there was also a cash offer $24,000 under asking looking for that cash price.
In a competitive market keep your offer clean. Don’t put any “hooks” in it, small items that gig the other party for a few hundred here and there. Everyone wants to be the great negotiator, but if you really want the property don’t trip over dollars to save a nickel, you will likely be lamenting the opportunity you missed by doing so. Value, like beauty, will always be in the eyes of the beholder. Don’t get swept up with auction fever unless you really want the property.
Real estate is a long-term investment. Remember that as you approach your purchase.
When it comes to choosing professionals to assist you with your Real Estate needs… Experience is Priceless! Jim Valentine, RE/MAX Gold Carson Valley, 775-781-3704. dpwtigers@hotmail.com.