Monday, March 11, 2013

Fast and Furious....the Buyers' New Home Buying Experience

The greater Seattle area has a seller's market.  We have low housing inventory and many buyers vying for the limited number of homes that are on the market.  In recent years, buyers have been taking their time to find a home, looking at dozens of houses before determining they want to write an offer.  They would look at a home, think about it a few days, view it again and perhaps want to see it again the following week, maybe even bringing family members or friends along for advice.  Those were the "good old days" for buyers.   They would bid low, walk away and wait for the sellers to drop their price before swooping in with an even lower offer. 

Those days are gone. Our current market is fast paced.  Buyers see a home and those in the know act quickly to put in an offer, often that same day.  They may have a "pre-inspection" before even placing an offer (at a cost of $400 or more) and waive any repair requests in order to make their offer more appealing to a seller who may receive a dozen or more offers. 

Our Coldwell Banker Bain office in Bellevue has mandated that we let our sellers know we must keep a property on the market at least three days.  This allows a multitude of buyers to see the home and creates a fair playing field for buyers.  It also often encourages bidding up of the price of a home, which sellers appreciate. 

An escalation clause may be used to present an offer that will beat the high bid by a price of a pre-determined amount but will not exceed what the buyer feels comfortable offering. For example, a buyer may find a home priced at $700,000 which is in a popular area and in fine condition.  A competent agent would call the listing agent and find out if there are other offers.  If so, she advises her clients and they determine what the property is worth to them.  I tell my buyers to determine the number at which they no longer feel bad if someone else got the property.  Is that price $704K? $725K?  $748K?  I recently heard of an escalation clause stating the buyer would pay $100K over the list price! 

Many first time buyers are not accustomed to this market and find it hard to believe a home will sell for over list price.  They also may feel the market is too fast for them to make such a large financial decision that will impact their lives for years. It is not unusual for buyers to "lose" a few homes before they understand they must act quickly if they find a home they like.  I encourage my buyers to call me as soon as they see a property they like and try to find time in their work day to view the property.  This gives them more time to consider if they want to write an offer on the home. 

I have had some buyers tell me that they will not offer more than list price.  Unfortunately, they may miss out on owning the best properties which are the ones with multiple offers.  Right now, with historically low interest rates, buyers have a wonderful advantage many buyers have not had for many years.  In addition, while we have seen prices creep up in the last year, the prices have not yet returned to the highs we saw in 2007, so buyers are getting two advantages:  lower prices which are likely heading up (instant equity) and record low interest rates which means every mortgage payment reduces the principal by a significant amount.  Many buyers are even considering 15 year mortgages with low interest rates which halves the normal amount of time a buyer faces paying back a loan.

All in all, it is a great time to buy or sell a home.  Please give me a call if you need an agent who is experienced in this fast and furious market.  I would delighted to use my knowledge and experience to represent your best interests.

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