Bidding wars are back with a vengeance.
The inventory of Southern California homes for sale hasn’t been this low since the spring of 2004, California Association of Realtors figures show. At the same time, demand is high as buyers rush to take advantage of record-low mortgage rates.
Given the current condition of the residential real estate market, it seems prudent to dust off my Primer on Multiple Offers.
So here we go.
For home sellers, regardless of the condition of your house and your efforts to update, clean, and stage it, you are very likely to get multiple offers.
This means it will take more of your time to review the different offers and the inherent pros and cons of each one.
The best thing to do is start a spreadsheet with all of the relevant factors and load it up with each of the offers. Your agent will probably do this for you, since as your fiduciary, she is obligated to make sure you get the deal that is best for you. Your agent can also help you determine the most relevant factors to compare across all of the offers.
I’d suggest purchase price amount, net proceeds, down payment amount, loan amount, FICO score, amount of money in the bank based on the proof of funds provided, the length of escrow, whether the buyers’ offer is contingent on selling their current home, and any personal property the buyers have requested, such as the refrigerator, washer, dryer or patio furniture.
Another key factor is the waiver of contingencies.
In today’s market, many buyers are waiving the appraisal contingency. This means the buyers will not back out of the deal if the appraisal comes in lower than the purchase price. If they are taking out a loan, they will pay the difference between the loan amount and the price.
If the proof of funds submitted with their initial offer is not enough to cover the distance once the appraisal report has been submitted, ask for an updated look at their finances. “Show me the money” is appropriate at this point.
And be aware, there are other contingencies the buyers can use to back out, based on their review of the seller disclosures and their inspection of the property.
For home buyers, be ready to make an offer.
Get your loan pre-approval completed and keep it up to date.
Don’t submit an offer with a three-month-old letter from your lender. And ask your lender to send your application all the way through underwriting. This is a much stronger position and should put your offer ahead of others.
Know your FICO score and only do things that will increase it – not decrease it.
Figure out if you have enough money to offer over the list price and know the consequences of such a move. Your lender will only loan against the appraised value of the property.
Stay on top of all the apps you’re using to find suitable homes and answer all calls, texts and emails from your agent.
And be ready to take a look at all options at a moment’s notice.
Leslie Sargent Eskildsen is an agent with Realty One Group West. She can be reached at 949-678-3373 or leslie@leslieeskildsen.com.
Source: Orange County Register
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