The highly competitive ‘sellers market’ we saw in the popular towns in 2013 has continued in 2014, and has expanded to those towns where the commute is longer or the school district not as good. So, what does it take to be a successful buyer in today’s highly competitive housing market?
The Offer Price is clearly important but it’s just one factor that, when combined with inspection, appraisal and mortgage conditions, convinces the seller that they a getting a good price and that the transaction will move to closing quickly and smoothly – what economists might describe as minimizing transaction costs.
Let’s look at the various contingency (inspection, mortgage etc) strategies:
Inspection Contingency – the inspection contingency allows a buyer to exit the contract if issues are found during the house inspection. This is a major worry for sellers because buyers agents and buyers know that should a house come back on the market after just a few days, issues were identified at the inspection and they are often reluctant to look at the house again. There are a number of strategies buyers can take to mitigate this issue – they often involve accepting additional risk and so they should be carefully considered, and will differ based on the property condition. It’s therefore important to discuss the various options with your buyers agent or contact the MA Properties Online Team for further clarification.
Mortgage Contingency – the mortgage contingency allows a buyer to exit the contract if they are unable to secure financing for the property purchase. It is possible to waive this contingency – but care is required here. At this point in the process (after Purchase and Sale) the buyer has 5% of the offer price in escrow as a deposit. If, having waived the contingency, a buyer applies but fails to get a mortgage they may lose their deposit. Also, if the house fails to appraise for the offer price and the buyer does not have sufficient funds to makeup any shortfall they may also lose their deposit. It’s therefore important to discuss waiving the mortgage contingency with your buyers agent or contact the MA Properties Online Team.
Home Sale Contingency – if a buyer has to sell their existing home to buy the new home this will be noted in the mortgage pre-approval. Even in this ‘sellers market’ where homes that are priced and marketed well often sell in the first weekend; seller’s are very nervous about accepting offers from buyers who need to sell in order to buy their home. Read the newsletter ‘Timing a Buy and a Sell’ for details on strategies that can minimize this factor and guide you when to sell your existing home.
Letter to the Sellers – often dismissed by buyers as having little effect, they play an important part when price and other terms are equal. Selling a home is not simply an asset transfer, the asset is where major life events took place – children were born and grew up, holidays when families came to visit, and summer parties with friends in the back yard. We all have an attachment to the house we live in and would like others to have the same experiences. This is where the letter to the seller plays a part. Provide information on what you love about the house, your family situation and any other details you think the seller should know. It won’t make the difference if you are thousands off the highest offer, but if you two offers are close then it may make the difference.
Successful offers will have some combination of these different factors based on the buyers specific circumstances, risk acceptance and financial security. The seller’s situation also determines which offer they will accept. For example, a seller who already has an accepted offer on their new home will probably weigh the factors that govern the successful completion of the transaction (the various contingencies) higher than the offer price.
This is the second post in the series Offer Strategies – Part 1 covered offer prices and appraisals.
The details of this post came from The following newsletter How to Make your Offer Successful in a Competitive Situation (or if you’re on your smartphone – How to Make your Offer Successful in a Competitive Situation)
The MA Properties Online team produce a newsletter on a monthly basis on topic of interest to both buyers and sellers – to see a complete list visit www.mapropertiesonline.com (or if you’re on your smartphone – mobile.mapropertiesonline.com) and look under the Newsletters tab.
If you have a real estate topic that you think needs more explanation please email me at Marcus Collins and we’ll look into writing a newsletter on the topic in the very near future.
The MA Properties Online tagline is “A Data Driven approach to real estate” and so for information on over 40 towns (and a lot more information on buying/selling) look at our website www.mapropertiesonline.com (or if you’re on your smartphone – mobile.mapropertiesonline.com) and if you have any questions do not hesitate to contact us on (617) 997 9145, or email at Dani.Fleming@MAPropertiesOnline.com.