Friday, July 20, 2018 / by Jen Reed
A hot topic among many homebuyers and investors entails just this: "What should I offer for this property?”
Because a typical home buyer does not deal with real estate transactions on a daily basis, I would advise them to seek advice from their current Realtor. However sadly, in many cases, some Realtors are supposed to be the go-to individuals in their Multiple Listing Service, but have not yet performed their Due Diligence on the market. Here are some things to take into consideration when attempting to provide an enticing offer.
Money Isn’t Everything
1) The Market
Many a time have I seen a property slip out from a potential client’s feet because of the simple fact that they do not understand the market in the same manner as their prospective agent.
There is so much activity going on in the Wilmington NC housing market right now, with buyers drastically outweighing sellers, thus lowering inventory and increasing prices. It is a simple tale of what? Supply and demand.
It is nearly impossible to make an offer right now without having some type of competition that may alter the amount that you are paying for your property and for a good reason: Right now the market is so hot that you could fry an egg on it!
Does that mean your agent wants you to pay more for this property so that they can make $XX more dollars on this property? Absolutely not. In reality, the difference in commissions on a good vs. bad offer equates to a bag of beef jerky at the gas station. A good Realtor understands inventory and market pricing and will provide a solution to get his or her client the desired property under the best circumstances possible. There should be no exceptions in this case, and if your agent is not doing his or her job, it is time to find a new one.
Much like the rest of our lives, timing is everything in this industry. How long has the prospective property been on market? One day? 3 years? This is very important information when determining what you may be willing to offer for a property. I’ve seen houses go on the market for 1-2 days and sell for 25% above their listing price.
To put this into perspective, that means a house listed for $200,000 could sell for $250,000! That is called crazy right? Nope, that is a classic example of perfect timing within the market. The seller knew that the market was on fire, and executed his or her timing perfectly.
On the flip side, it is not uncommon to see an incredible deal on an internet website that has been on the market forever. “Why?”you might ask. There could very easily be a plethora of reasons for not selling the property. This is where you need to seek advice from a Real Estate expert in your area to ensure that you are not making a bad investment, or worse, buying a faulty property to live in.
There is always the Due Diligence period to check out all structures and systems within the house before you are 100% committed to purchasing, however it is not uncommon to find turmoil and regret after an offer has been made. On a run-down listing that has been sitting there for multiple months (and even years), I advise my clients to apply Murphy’s law: “Whatever can go wrong, will."
This is a safe strategy for investors, especially because you can almost be sure that there has been an offer and termination made on the property in question, and for some reason the previous buyers backed out. What does that tell us? Hmm...There are some underlying issues here that do not meet the naked eye. What if that same investor had jumped on this property the first day it was on the market, and overpaid for undesirable real estate? Not cool, and once again it is your agent’s job to provide valuable insight to the purchaser.
You can see how timing can make quite a difference in these situations, right?
This especially holds true for the current real estate market, where there are many more home buyers than home sellers.
Any piece of property can entice multiple buyers, thus yielding multiple offers. In a multiple offer situation, it is important to come in with an attractive offer that stands a strong chance of acceptance if you are serious about the prospective property.
For example, the average price of a home in the Wilmington, North Carolina area is roughly $245,000. Are you securing a VA loan, FHA loan, conventional loan, or cash? VA and FHA loans can require strict repairs to be completed before closing, while conventional and cash purchases are more lenient. Each different type of loan also has a different down payment requirement, which can also tilt the seller’s head in one direction or the other. Speak with your lender or agent to get more details.
Closing costs are another major issue here. On a standard house that costs $245,000, would you be willing to offer $250,000 with $5,000 in closing costs? Or would you be the person to offer $245,000 with no closing costs? These differences, though minute, really skew the seller’s perspective. The $250,000 offer looks better on paper, although it nets the seller the same amount of money. A higher purchase price, though not necessarily a “better offer” is more likely to get you into the home of your dreams.
Perspective is everything when it comes to real estate
If you are thinking about buying or selling in your area, I would highly recommend speaking with an agent. Buying or selling a home is one of the largest transactions that you can make in a lifetime, and there is no room for error on such a purchase. If you decide not to work with an agent, make sure you know what you are getting into before you make an offer on a home and do your market research. Make sure that you are buying a home, not simply a house.
Coincidentally, if you find yourself fretting over the home of your dreams, the KBT Realty team is welcoming clients daily and would love to have your business.