It is a bid game out there and same scenario way back in 2004-2005. That was the best times when buyers and their agents were competing to win over a contract to purchase a home by putting more on the asking price. It is a very good sign considering what we have gone through where average days of homes in the market was around 180 to 200 days or six to seven months before it could luckily be sold.
It has turned around since June where mostly first time homebuyers want to take advantage of the up to $8,000 tax credit which expires Dec 1 of this year. Once the house is listed in MLS; a system used by all realtors, this will eventually be captured by different home search website such as realtor.com, zillow.com, homedatabase.com etc. A contract is actually received by the listing agent sometimes in less than a week regardless of the condition of the house. The public is now sophisticated by using technologies in their home search. They can look for themselves and identify a regular sale, short sales, foreclosures and bank owned. They surfed through these websites and know exactly what they want. Of course, they still need Realtors® for representation and perform all the negotiations to look after their best interest. The big difference? The lenders and the banks are in control of the transactions and not the homeowners.
The question now is how to win over other offers? Some homebuyers are frustrated and sometimes blame their Realtors® if they cannot win a ratified contract after trying multiple times putting an offer to their dream house. Aside from a cash offer, which of course is very attractive to sellers, their agents and lenders; there are some ways your offer maybe competitive as well. The sellers, banks, lenders, and their agents are looking on the following:
OFFER PRICE no brainer, the higher the price the better. But be careful, if you bid too much and the property was not appraised on what you offered, you may end up paying for the difference, walk away from the deal, or tough luck, the bank is willing to adjust the price on the appraised value.
LOAN APPROVAL an approved buyer is much better than pre approved or pre qualified buyer on the loan.
EARNEST MONEY DEPOSIT- at least 1% or more shows your good faith in buying the property. Low earnest money deposit maybe a sign that you can just walk away from the contract if you change your mind.
FHA VS. CONVENTIONAL LOANS FHA loans requires at least from three to six percent down payment and may vary while Conventional should have at least 20% down payment. The higher the down payment, the better. Some homes are not FHA approved or may not pass the FHA home inspection or appraisal. Most buyers now are FHA approved.
SELLERS CONCESSIONS- these are sellers contribution where buyers are asking for all or portion of the closing cost depends on what is approved by the loans. Minimum or nothing at all may put you at the top of the list.
CONTINGENCIES or conditions by the buyer to the seller that need to be met during the transaction. It could be Financing, Appraisal, Home Inspections etc. Again, the least or nothing at all, the better. However you have to weigh some factors and use your best judgment, especially if you are buying a distressed property. Make sure you still get your moneys worth.
CLOSING DATE there is no guarantee on this date anymore when you buy these types of properties; it could be a month or up to a year. If you are in a hurry and have a set up date to move, then you might as well look for regular sales homes in the market where you may have a control on the timing.
PRESENTATION OF THE CONTRACT- a poor written contract is sometimes a factor. This reflects what type of representation you have by your Real Estate Agent. This could be a lot of typo errors and missing information. The credibility and efficiency of the agent lies on this. Review the contract with your Real Estate agent and point out some errors and make suggestions if necessary on what you think will look good on the sellers or banks point of view.
Your Real Estate Agent will guide you through the process but there is no set standard as to the process and timing on these transactions. Different lenders and banks have different procedures and it is so difficult to guess or determine who does what. You as a buyer should be flexible in all aspects; otherwise you may have a ratified contract but will not be able to settle at all.
(Note: Jocelyn Porteria is a Realtor® licensed in VA. She earned a designation of ABR, Accredited Buyers Specialist and a CDPE Certified Distressed Property and Short Sale Expert. For more info, call her at 571-432-8335 or email at email@example.com)