When A Buyers Market Becomes A Sellers Market
With the market shifting from a buyers market with lots of homes for sale and plenty of sellers willing to accept any offer that comes in to a seller’s market with low inventory and rising prices here are five things to avoid losing out on the home you are trying to buy. Here are 5 Things Home Buyers Should Not Do When Making An Offer.
Make A Ridiculously Low Ball Offer
What is a Low Ball Offer.? I want to be clear here when it comes to making a low ball offer and this is an example of what not to do. You find a house you really like and would work perfectly for you and your family. It’s in your budget, near your work, in a good school district and is in very good shape. Now if you are using a real estate agent who knows the neighborhood and the area,, they will have done a Comparative Market Analysis to establish what the house is worth based on similar homes that have sold recently. Lets just say the house is listed for $225,000 has only been on the market a couple of weeks and your agent shows you that over the last three months comparable homes have sold for between $222,000 and $227,000. Don’t offer them $180,000 for it! That’s the type of low ball offer that will annoy a seller and you could lose out on a great house for your family.
I’m not saying there is never a time for a low ball offer, in fact if your agent has done the research and the comps can back it up, here is a scenario when it’s not only acceptable but a smart home buying decision. Lets say this house is listed for $225,000 and your agent shows the recent sales of homes very similar to this one in the comparative market analysis for the last 3 months to be between $190,000 and $200,000. Then an offer of $180,000 would be perfectly acceptable, maybe not to the seller, but that house is over priced for the neighborhood. Each transaction is different and unique, supply and demand, emotions and expectations play a large part in getting to the closing table.
None Or Too Little Due Diligence Money.
In North Carolina the Offer to Purchase and Contract has a provision called Due Diligence, which is a period of time a home buyer has to perform all of their inspections and have their loan approved by a certain date. Up until that date they can terminate the contract for any or no reason and get their earnest money back. The seller is paid a Due Diligence amount which they get to keep regardless ( most of the time) and they agree to take the house from active to contingent in the Triangle Multiple Listing Service. It is unlikely to be shown again unless it is in a super hot market with homes selling quickly and there is not a lot of them. So the buyer can walk away at anytime up to 5 PM on the date chosen as the due diligence, typically 30 – 45 days. Show your intention that you want to buy this house and offer the seller an amount that says so. Remember whatever the amount the due diligence is, that is applied to the sale price so it’s not additional money you are spending.
Not Enough Earnest Money Deposit.
If all you can afford to put down as Earnest Money is $100, then you might not be ready to buy a house. The Earnest Money Deposit (EMD) is a sign of good faith on behalf of the home buyer that they are serious about buying the house. The larger the amount the more serious the intent. What does it matter what the amount is if the buyer can get it back if they terminate before the due diligence date? We are going under the assumption that you, the home buyer really want to buy this house and would be disappointed if that did not happen. There are a couple of reasons why you should not offer a small earnest money deposit
1. A competing offer could come in with a higher amount and you could lose the house.
2. If you want the seller to really consider your offer a small amount for EMD will not help the cause. EMD is deposited in a trust account of the real estate company normally the listing agent’s company but it could be the buyers or an attorney’s trust account. That money is held until the settlement date when the attorney disperses the funds, it is applied to the sale price.
Ask For All Your Closing Costs
Again if you have no money for anything associated with buying a home, you may want to hold off, save some money and come back in a much stronger position. It is common although not exclusively the case in North Carolina where the seller will pay some or all of the closing costs for the buyer. This is what agents immediately check after they have received an offer and have seen the offer price, because it is essentially a price reduction as far as the seller is concerned. What ever closing costs the seller agrees to pay comes off their bottom line, what they receive for their house. It’s OK to ask for all of the closing costs just don’t expect the seller to pay for them all and lower their price.
Don’t Send A Pre-Qual Letter With The Offer.
Before you start looking at homes for sale in Clayton or anywhere for that matter, you need to be pre -qualified with a bank or credit union, a Mortgage Broker or Loan Officer. There are a couple of reasons, one is that most good agents won’t drive around showing you houses if you’re not pre-qualified. You need to get a loan and these folks tell you what you can borrow, how much house you can afford, how much you need to put down, what your closing costs will be. Once they have reviewed your credit history, income, expenditures etc, they will write a pre-qual letter. It will either mention the address of the house you are making the offer on or a dollar amount. Make sure you give that to your real estate agent and they send that to the seller with the offer. Without it a seller cannot make a determination as to whether to enter into a contract with you and often they won’t counter until they see it.
If This Is The House For You Give The Seller A Clue
To be clear any one of these 5 Things Home Buyers Should Not Do When Making An Offer by themselves could probably be overcome, maybe even two or three of them but if you’re serious about the house and it’s the one for you, I’d advise against making an offer with all 5. It’s not impossible to get even the worst offer imaginable worked out, I’ve seen it happen but in today’s Clayton real estate market, not so much.
Buying a house in Clayton, North Carolina, Wake or Johnston County, I can help call (919) 601-2268 or email me at firstname.lastname@example.org