As we approach the busy spring and summer selling periods here in Lake Tahoe and Truckee there is a huge amount of activity for well priced homes and by huge amount I mean fiercely competitive with buyers circling around REO’s with talons sharpened and ready to strike. Buyers need to know that activity levels are strong and that they are not the only ones looking for the best deals out there.
The lower priced distressed sales are attracting all the attention so it is very important to be aware of value vs pricing. If a $350K house is priced at $299K then the house is going to have offers and most likely multiple offers, many of which will be above asking price, and with investors looking to make a buck you need to expect cash offers that could beat out your offer. Buyers need to be made aware of value vs pricing so that they can submit a good offer that makes sense for them but also ensures a good fighting chance to get acceptance from the seller. This was a common pricing strategy during the early 2000’s and it has resurfaced creating a very competative market for distressed properties in the Lake Tahoe markets.
Tips to get your offer accepted:
1) Price – Anticipate multiple offers and come in strong, make sure your Realtor analyzes all comps and advises you on the value range for the subject property. If a given property has a value range of $500 to $550 and it is listed for $480K, do not be afraid to come in over asking and strong within the value range. It always stinks when you get beat out by $5K and your offer was $20K below the max value range. Make sure that you consider your goals, budget, and what would make you feel satisfied. Do not expect a multiple counter if there is more than one offer on the table, expect the highest and best offer to be accepted. If you get a multiple counter offer that is great, just don’t expect it, even if the listing agent tells you that the bank always does multiple counter offers, its the sellers choice and this can screw up your strategy.
2) COE – With REO’s the bank wants to close escrow quickly. For cash buyers reduce the COE to the fewest days possible for inspections and to close escrow. If you can make this happen in 10 days than do it, your offer will be much stronger than another similar offer with a 30 day escrow. For buyers financing the transaction it is hard to come in under 30 days so make sure that your price reflects the fact that your escrow period is longer. If you have an idea that an all cash offer is coming in at $230K with a 10 day close than you are going to have to come up significantly on price to offset the short close, maybe $250K, so you want to make sure you have a good idea of value before you start throwing money around. With short sales the escrow period will rarely effect the sellers acceptance as short sales take forever to close 3-6+ months.
3) Contingencies – If you have to have a loan, make sure your buyer is pre-qualified and the loan process has begun. This will ensure that you can have a shorted escrow period. I always like to talk to the mtg broker prior to writing an offer so that I can find out how quickly they can move so that we can show the shortest escrow possible in the offer.
Your inspection period should also be a reasonable time frame to accomplish home/pest inspection and other inspections that may be needed. 17 days is typically more than enough time if you move quickly and if something major comes up and you need more time you can always ask for a time extension. The shorter the inspection period the better as it will strengthen your offer.
Keep it local! If you have a loan and an appraisal is needed make sure that the appraiser assigned to your loan is a local appraiser. Out of area appraisers create headaches and can draw out the escrow. Always ask if they are using a local appraiser and if they are not do everything in your power to get a local appraiser assigned to your loan. With the inception of the HVCC we have seen appraisal fees go up, quality go down, and time frames extended. Keeping it local will help ensure the success of your appraisal contingency.
4) Costs – If you want your offer to be strong than minimize the sellers costs. Each time you split a cost with the seller or ask the seller to pay for an item you are weakening your offer. In Tahoe the seller typically pays for the Natural Hazard Disclosure, the transfer tax, and if its a land deal the seller would typically pay for topo maps, soil testing etc. Often times with a REO sale the seller will pay escrow fee’s if you use there title company. This can create problems but often it will work out fine and is a great way to save money. The bottom line is the more you ask for the weaker the offer. If you are getting a property well below market value try to keep your seller requests to a minimum.
If you follow these guidelines that should be adjusted for specific cases you will ensure that you get the property that you want for a reasonable price and most of the time you will beat out the other offers. Each situation is very specific and has numerous intricacies so make sure you think of all angles and how other Realtors will write up offers. Everyone wants a killer deal but with a great strategy you can up your odds of being the person that gets the best deal on the property you want. If you have any questions or would like to talk strategy feel free to contact me anytime.
Best regards, Dave