Staying one step ahead in an ultra-competitive market
The experts are still scratching their heads. Yet somehow, despite record unemployment and ongoing signs of a recession, the last four months have brought unexpected growth in the national real estate market. And Central Oregon certainly is no exception. In fact, our local market has become so competitive, in many cases properties are in multiple-offer scenarios and going under contract within 24 to 48 hours.
As a result, it’s critical that buyers have all of their proverbial ducks in a row when one small item can be the difference between an accepted offer and one that gets tossed out immediately.
So how should you go about purchasing a property in the current market conditions?
First and foremost, now is not the time to fool around with a do-it-yourself approach. In times like these, working with a real estate professional is more important than ever. Real estate brokers are well-versed in dealing with situations like how to write a clean, competitive offer or even multiple offers on a daily basis. And if you’re working with a broker like Duke Warner, there’s a whole array of experienced pros who can offer additional insight when an unusual situation or question arises.
Simply put, current market conditions do not allow time on a buyer’s side. One misstep or misunderstanding on paperwork, inspection or financing contingencies can push an offer off the table. So it’s imperative to be decisive and put together your best offer right out of the gate.
If financing is needed, make sure that a prequalification letter is attached with the offer. When a seller has multiple offers to consider and has the luxury of being picky, eliminating the question of whether the buyer is immediately qualified for a loan is one less concern.
Timing is also of the essence when making an offer. Does the seller want a quick close? Or do they need a slightly longer escrow to make moving arrangements or find a replacement property. The seller is driving the bus when it comes to timing, so having the flexibility to work with the seller’s schedule is a key advantage.
Yet another way to gain a competitive advantage is with your earnest money deposit and down payment. The earnest money deposit – typically about 1% of the purchase price – demonstrates to a seller that you have cash in hand and you’re ready to perform. In a competitive market, however, it’s wise to double or even triple that amount. What’s more, when financing is necessary, having a large down payment again indicates to a seller that you are capable of performing, and reduces the likelihood of loan qualification issues arising.
Finally, in a multiple-offer situation you may need to consider offering above the list price or adding an escalation clause. The clause essentially claims that you are willing to increase your purchase price if another offer comes in higher than your original. These clauses can be tricky, of course, especially if a competing buyer has one as well.
Needless to say, it’s best to have a clear discussion and continued communication with your real estate professional before offering amounts above the asking price. And as long as you have to compete with the Joneses, the Smiths, the Browns and everyone else, it’s good to have sound, professional advice on your side. It can be the difference between securing the home of your dreams and another case of you snooze, you lose.
Some information provided by Christin J. Hunter.