Currently we’re in a seller’s real estate market in Long Beach and surrounding communities, meaning sellers have the upper hand and there is a low inventory of homes for buyers to choose from. Yet the currently low interest rates are appealing for buyers, many of whom want to purchase a home before prices climb much higher. As a result, buyers can encounter multiple offer situations and even bidding wars.
Finding a home you love, making an offer on it and losing it to another buyer can be frustrating. And having that happen multiple times can be demoralizing and depressing.
So how as a buyer do you stack the cards in your favor?
- Here’s some things you can do: Become familiar with comparable sales prices and expect to pay market value. Yes, there are occasionally “deals” out there but in many neighborhoods of Long Beach, CA and surrounding communities, the average sales price is more than 100 percent of list price. It’s not uncommon to see homes selling for 100 to 110 percent of list price. That can be because the seller priced the home below market value to create a bidding war – or simply because intense buyer interest drove the price above what other homes have been selling for. We’re now in an “appreciating market” and prices are going up. You may need to structure your offer accordingly.
- Get pre-approved (NOT pre-qualified) with a reputable direct lender, preferably with a loan officer who works in the area you’re looking in. Pre-approval will require submitting your bank statements, tax returns, and paycheck stubs but it’s far more powerful to have that than a simple pre-qualification. Most sellers will not even look at your offer without it. Also, know that you may have to get cross-qualified or cross-approved with another lender before a particular seller will consider your offer. Keep your paperwork handy in case you need to do this. Don’t take it personally if you’re asked to do so. The seller and listing agent don’t know you or your lender and they want a second opinion from someone they trust.
- Don’t ask the seller to credit you for closing costs unless you really need them. You may be competing against other buyers who don’t need that credit and all other things being equal, the sellers would probably prefer that offer if the bottom line is the same as yours. Take an example of a $400,000 sales price. Buyers who need a $12,000 credit for closing costs are effectively offering the sellers $388,000. And even if they offer $412,000 to compensate for the closing cost credit, the net to the seller would be less than for a straight $400,000 offer because the seller will pay slightly higher commission, tax stamps, escrow and title fees. Plus, the property would now need to appraise at a higher value. If you need a credit for closing costs, consider seeing if your lender can structure your loan with a lender credit or explore whether there’s a family member who may be able to “gift” you funds.
- When you make your offer, you’ll be offering an “earnest money” or “good faith deposit.” If it’s too low, the seller may not consider that it shows much “good faith.” Sellers like to see that buyers have “skin in the game.” Good faith deposits are typically 1 to 3 percent of the sales price.
- Time is of the essence. Act quickly if you see a home you like. If you feel comfortable shortening your contingency periods, do so. Sellers like to know that there’s a shorter period of uncertainty before you’re committed to moving forward.
- Have your agent explore what’s important to the sellers. What timing are they looking for? What appliances do they plan to include or exclude? Will they need any additional occupancy time after escrow closes? Will they agree to provide termite clearance or a home warranty? The closer your offer is to something the seller can just accept, the better it will be received. If the seller is a “regular” seller rather than a bank or institutional investor, consider including a personal letter with your offer, telling a little about yourself and why you like the home. Letters can make a difference, helping you stand out from other buyers.
- Work with a local, reputable agent who has connections within the community. If your agent doesn’t return your phone calls or you don’t like him or her or find that follow-up is lacking, then other agents may share your opinion. I’ve been selling real estate in Long Beach for 15 years so I have developed positive working relationships with many local agents. This can benefit my clients, particularly if we’re competing against an offer submitted by an inexperienced or out-of-area agent. These relationships also mean that I’ll sometimes find out about properties before they hit the Multiple Listing Service. People like to work with people they know.
- Develop a thick skin. If your offer isn’t accepted, don’t take it personally. The sellers are simply picking what they think is the best offer. It’s disappointing to be rejected but it isn’t the only house in the world.
Keep trying. Keep looking and writing offers. Stay positive.