Summer is here! Its hot outside and the real estate market is booming. In Michigan, More homes are sold in the months of April through August than the rest of the year combined. What I like to call Seller Season has arrived.
There are plenty of people that fall in love with a home during these months. The scene is so perfect. Birds chirping, flowers blooming, then the inside of the house has hardwood floors an open floor plan, stainless steel appliances and marble counters. You want the house! You tell your agent to put in an offer!
7 other people felt the exact same way. BEST AND FINAL DUE AT 5PM
These market conditions where there are more qualified buyers wanting to purchase than there are owners willing to Sell creates an uptick in price for the good homes. That doesn’t always mean you have to offer more money to get the house of your dreams.
Offers are comprised of 3 components.
1.) Price – This is the amount you are willing to pay for your home. Most feel this is the most important number. Bid too low, you’re eliminated, bid too high and you may find yourself losing out on financing to a low appraisal or worse stuck making up the difference you overbid in cash.
2.) Terms – The other words on the page of that purchase agreement you signed mean things too. Things like the closing date, your Earnest Money Deposit, Inspection Periods, etc. Have your agent explain these terms to you and decide what works best for your situation. Terms also include contingencies. Contingencies are non-negotiable terms that will stop the deal if they are not met satisfactorily. The most common examples are the Home Inspection and obtaining Financing.
3) Conditions – Sometimes a home needs work. There are things that you ask the Seller to take care of before you purchase their home or you will not buy it. Maybe you ask them to fix a hole in the floor, or paint the cieling. Perhaps you need some help covering your closing costs. All of these things. These are conditions.
MAKE THE OFFER! You miss 100% of the shots you don’t take. It is important to submit the right combination of these 3 components. So let’s do one. using some simple numbers.
You and Sally, your agent, pull up to a house that’s priced at $200,000. Its Perfect on the outside. Nice clean streets, great curb appeal, and its in the top school district in the state. Inside The kitchen is nice but the sink has not been installed. The basement is finished. It has 4 bedrooms and 2 Full bathrooms.
Sally tells you Homes in the area have been selling in the range of 200,000-215,000 for homes with 4 bedrooms 2 bathrooms and no finished basement. You find out through public sales records the Seller purchased their home 7 years ago for 150,000. Using these facts. How do we beat out 7 other offers on the home? You’re lender has approved you for $220,000. You tell Sally do what it takes to get it done.
In this case, Sally must consider the seller’s bottom line when structuring the 3 components of her deal.
The Price is Fair. Comparable sales have shown homes like this have sold for more than what the Sellers are asking and although there are flaws(no sink in the kitchen) This home has improvements (a finished basement) over past sales in the area. Sally says to offer 210,000 because she finds out the seller’s refinanced their home 2 years ago and owe more money than they paid. Keep in mind Sellers have Closing Costs too. Your financing requires a 20% down payment. Higher Down Payments make your offer attractive to the Seller, because you’re financing is less likely to fall apart. Finally, Sally concludes We can close this deal in 30 days, which is important to the sellers. They priced the home below market value to move quickly.
To win the bidding war, its best to find out what the Seller wants and offer it to them. During this season, I strongly discourage “low-balling” a home. A strong agent will ask the right questions and research the home’s history before recommending the best price, terms and conditions.