Today's real estate environment has evolved over the past two years. Although prices may have hit bottom, some of that may be due to a new strategy being used by banks to unload their bank owned properties for the maximum price the market will allow. Banks have learned what real estate professionals have been saying in this down market all along; price the home below the market.
For a number of reason, buyers and especially first time buyers have started getting into the market. I see it in a number of ways. I'm seeing increased numbers in my calls from buyers, responses to advertising, leads from lead generating companies and traffic to my web site. While this is great news for the industry, new tactics are being used by the banks to reduce their inventory. The banks have learned that if you under-price a home, it will attract a lot of attention. Buyers believe that they have finally found their dream home at an affordable price. However, they also quickly discover that they are not alone. Interest in the under priced home quickly results in multiple offers on the home and a situation similar to the market frenzy of 2004-2005 quickly drives the asking price to the maximum price the market will bear.
The point of this article is to first, alert you to this phenomenon. Secondly, I will endeavor to provide some guidance that may help you to compete in this new arena. How can you compete and win in this bidding war? By understanding how each offer is viewed by the banks and how you can structure your offer to give yourself the best competitive edge.
Remember, I'm not suggesting that all banks have now begun to price the homes they control, correctly. It is always smart to have good representation and insist on detailed comparable studies be completed in order to know if the price is indeed, "below market."
Banks want to move quickly to get rid of their inventory. Every dollar tied up in inventory is money they cannot lend. Additionally, the longer it takes to sell a home, the more holding costs the banks incur.
If YOU can pay all cash, you eliminate the bank's time to close because you aren't going requiring a contingency period for financing approvals, appraisals, etc. This also saves you "out-of-pocket" expenses. The shorter time it will take to close your deal, the more attractive your offer looks to the bank.
Here are a few other ways you can increase the attractiveness of your offer:
Have all of your loan application completed in advance. Make sure you bring everything your lender requests.
Have the bank issue a pre-approval letter that is actually signed and not just produced by a computer.
Put in as big a down payment as you can possibly afford.
Be prepared to accept the home in as-is condition and spell it out in the offer.
Reduce the close of escrow to less than 30 days if at all possible.
Reduce the inspection contingency to no more than 5 to 7 days.
Offer to pay more than the asking price, if possible.
Now that you finally decided become a homeowner, you need to plan ahead, as we get closer to the end of the "up to $8,000" tax credit window of November 30 2009, there will be far more competition and you will need all the help you can get. Don't try to go at it alone. Find and work closely with a qualified professional and be prepared to go see a house as soon as it is on the market and possibly write an offer on the spot.
Happy Hunting!
Bud Cooke, GRI, e-PRO®, Charles Rutenberg Realty, Inc. Serving Pinellas County, Florida and the Gulf Beaches
Visit us at http://www.Selling-Pinellas.com, & http://www.BudCooke.com. Write to Bud@BudCooke.com or call at 727-459-5460.