Scott emailed that he saw a property in North Park yesterday that had 52 offers on it.
Bidding wars will be more common, as prices get more reasonable.
Sellers who need to sell must list at an attractive price. The internet provides instant mass exposure, and – boom – many interested buyers show up. The short-sale house on Sonoma in Carmel Valley was open Monday morning for the first look, and the agent had 7 people waiting for him when he got there at 10:00am! By the end of the day he was calling it a ‘stampede’.
Don’t want to get in a bidding war? No problem, there will be years of opportunities ahead.
But if you find a house that suits your needs – here are some tips, in case there is competition:
Clean Offers – Simple offers work. If you can beef them up with a higher good-faith deposit, more down payment, and shorter escrow time, great. But a simple yet solid offer portrays a low-maintenance buyer, and sellers and listing agents appreciate those.
Conventional Offers – If you can avoid FHA/VA offers, especially those packed with credits, you’ll stand out from the crowd. If you have to go FHA, then go for it, but the appraisers are tougher on the condition of the property, so listing agents try to avoid them if possible.
Supporting Documentation – Every pre-qual letter these days say it’s a “pre-approval”, so if you really want to impress the seller/listing agent, include the bank’s actual approval sheet to prove it. If you win you have to show a bank statement as evidence of funds to close, you might as well send that in too, help your case.
Be First – Every once and a while there is a lull in the market, and you might get lucky. if you are the first to send in an offer, and the seller is anxious and doesn’t see or hear of any other offers, they might sign it. But be sure that you’re on to a great match for you, and not just jumpy.
Electronic Signature – Not required, but it is faster, easier, and gives the impression that the buyer’s agent is a top professional.
Introductory Letter – As goofy as these are, I think they make a difference. There is less personal interaction in the real estate business these days (we get many offers sent to us without a phone call from the buyer’s agent) and a simple paragraph on your intent would be favorable. The listing agents don’t care how many kids you have, or that you’ll live in this house forever, they want to know how strong you are – will you endure a tough bank addendum, buy “as-is”, and close on time.
Read Bank Addendums – It’s hard to read every bank addendum in advance, but if you can, and mention that, great. It is a stumbling block for many buyers, and the listing agents know it.
Here is a copy of one:
Buyer’s Agent Intro – There are so many agents that most are unknown to the listing agent. Have your agent submit their history/experience too. Don’t go crazy, a half-page will do, just enough to give the impression that they can close a deal.
Amount to Offer – Most banks are going to counter-offer for every buyer to submit their highest-and-best offer, but if you think you might be able to sneak in unscathed, at least offer full price and hope they sign it. If you know there are already offers in, make sure your agent gets the protocol on how it’ll be handled from the listing agent. There are NO rules or standards, the listing agent can handle it however they want – be clear on the procedure. Then know that most buyers cap out at 10% over list price, if you love the place, and can stomach paying 11% or more over list, that should take it.
The Dixon property had 13 offers, and went out at $351,000, or 11.5% over LP with a 20% down conventional offer, and there were higher FHA/VA offers submitted. But the possible low-appraisal issue wasn’t worth the risk.
There are more ideas – leave your thoughts in the comments section!
When you have time I’d love to see a jumbo financing round-up. I hear loan limits are going up on May 15. What rates are realistically available on the jumbos (I see a huge dispersion in online rate quotes)?
Also, is jumbo FHA a realistic option for someone with good credit and a down payment but who’d rather keep the down payment and let the taxpayers take the downside risk? I’d love to put 3% down and get a 30-year fixed, and be able to walk away if the market continues dropping. How much does the required PMI cost?
Jim, Thanks for a copy of a bank sales-addendum. I’ve put reading those 16 pages on my to-do list today.
So other than people thinking they’re getting a deal, why is a foreclosure with the bank add-on hassles going for $350K for a 3/2.5 when just down the street towards the ocean, a larger 4/3 is sitting at $365K and is listed as neither a short sale or foreclosure?
Is the yard premium that much or is there some other difference that occurs that quickly in oceanside? I must admit, I’d prefer the yard but… looking at Redfin, $350 isn’t rare.
Maybe Stirrup way. http://www.redfin.com/CA/Oceanside/5403-Stirrup-Way-92057/home/3241201
And where’s the competition down on Mapleway ending up?
Bidding wars will be more common, as prices get more reasonable.
Codicile to the above: “Reasonable” may change.
The only thing I’d add is a caution about privacy. Given a chance they’ll ask you about your… ummm… shoe size. Supporting documentation should be like a bikini; large enough to cover but small enough to be interesting.
Were bidding wars and multiple offers common prior to the bubble years? Maybe in the late 80’s, but that was a smaller bubble in and of itself.
Too many people must’ve missed out on the last runup and they’re afraid of missing out on the next one. Problem is… there isn’t a next one.
You had commented in that recent article about there being no education process for homebuying. This post is a good step forward in that regard. Perhaps you can use further posts & videos themed to reinforce other significant points.
I’ve been thinking that you could make some bucks — and/or garner new clients — by holding “Home Buyer Beware” seminars. Given your newfound notoriety and “Honest Jim” reputation I believe you could pack’em in, even charging a decent rate per head. Key to it would be to distance yourself from the “Make Millions Investing in Real Estate” crowd and focus on serious home buyers.
Without a doubt, a nice little “lecture” reinforced by specially selected videos would make for a fun and informative evening.
Off the top of my head, I can’t think of ANYTHING worth getting in a bidding war over. It just seems too easy to pay too much money that way – especially in a declining market (which accurately describes the majority of neighborhoods discussed in this blog.)
Of course, for sellers this is an excellent strategy. And, of course, it’s a strategy Jim’s been talking about all along.
TJ, I know you’re relatively new to the blog, but Jim’s reputation as an honest agent is hardly “newfound,” and over the years there have been many informative posts like this of all natures. I have to imagine this blog has attracted the type of serious buyers and sellers Jim would like to work with. With all due respect, I personally think seminars are a great way to attract clown cars and blue-hairs looking for free meals (IMHO.)
Talk about setting the right price, the foreclosure you mentioned earlier in your blog on Del Mar Mesa Road (aka the fire station home) had for sell signs on it for three days, and now the signs are gone. Looks like the right price will get anything to sell.
On clean offers, The asset managers would presumably like to see all cash offers with proof of funds more than any other offer.
So I am thinking these banks can’t close quickly anyway, even if you offer a short escrow. So if you are comfortable not having a financing contingincy in your offer, and you qualify for good financing, why not offer all cash to get the offer accepted and go get your financing anyway while the bank is taking their sweet time? You could probably use the cash offer to win the bidding war and then wind up closing with a 3 1/2% FHA loan if you wanted to.
I’m a longtime lurker but relatively recent commenter. Also, if you re-read my comment, the “newfound” was only in regards to “notoriety”.
We’re of the same mind on RE seminars, which is why I stated it would have to be handled correctly. It’s not like there isn’t a crying need.
I can buy but I’ve pretty much given up. It’s just not worth the stress and hassle. I have a decent downpayment saved up which would allow me to live for roughly three years without working. I want to be part of the protected homeowner class but it’s not something I need.
I’m sure there lots of buyers just like myself. Eventually the tide will change. Evenually the banks will be forced to show their hand. At that time I’ll take advantage.
It’s just so frustrating when I meet the deadbeats living for free in houses I’d like to buy because bank don’t want to realize the loss.
The best time to buy, as always, will be when nothing is selling and virtually every friend & family member is warning you NOT to buy.
They’ll give you some stress, but it’ll be the easiest deal you’ll ever make.
Have a beer and come back in the fall of 2010. Watching the day to day ebb & flow b.s. is worthless.
Prices will be lower in 18 months then they are today.
What angers me is all the government hooey they put together to keep “owners” in their homes. It reinforces the fraudsters and scammers. But it also punishes people like me that earn their way through life.
Well said, shadash. We share your anger regarding the govt bailouts of deadbeats (borrowers AND leveraged lenders).
One thing I’ve noticed during this most recent downturn is that we never had any kind of capitulation. It went directly from the peak of the bubble to “better buy now when prices and rates are low so you don’t miss out and get priced out…FOREVER!”
People have said it’s a bad time to sell, but I have yet to hear anyone admit to it being a bad time to buy. The bubble mentality is still very much with us. People think this is a lull until we get back to 30% increases every year.
Unfortunately, it will take wave after wave of these new investors gettting washed out before it’s really time to buy.
I’ve been thinking that you could make some bucks — and/or garner new clients — by holding “Home Buyer Beware” seminars.
Seems to me that he is accomplishing that pretty well already, by way of this forum.
“People have said it’s a bad time to sell, but I have yet to hear anyone admit to it being a bad time to buy. The bubble mentality is still very much with us. People think this is a lull until we get back to 30% increases every year.
Unfortunately, it will take wave after wave of these new investors gettting washed out before it’s really time to buy”.
You nailed it CA Renter!
Hey Guys–This is North County Coastal San Diego–In order to see the markets like you are describing you will need to go to Las Vegas, Phoenix or inland areas where people are fleeing–As prices drop in Coastal Areas of So Cal, demand, not only from investors, but from those who lived in other areas who but were priced out of coastal before come into play (especially commuters). I am not saying prices won’t fall further, but the markets you are descrbing just will NOT happen.
Local Boy = “It’s different here”
me thinks banks aren’t hanging onto REO’s to avoid recognizing the losses… they are simply overwhelmed. you’d think they’d want to show lossses galore to get bailout money before it dries up. but whether that statement is true or not, what is absolutely clear is banks don’t have the staffing to handle all of the REO’s, Short Sales, and now massive wave of re-fi’s thanks to lower interest rates.
I am not saying prices won’t fall further, but the markets you are descrbing just will NOT happen.
Duly noted for future reference. Hope you like crow.
where did the recent multiple offer frenzy come from? did I miss the obama press conference where he said it might just be a good time to invest in the real estate market? just like he did about the stock market igniting a 6 week rally.
Jim, sell ’em while its hot and I know you’ll sell ’em when its not. its what you do…sell houses! Stay in the game another 15 years, you’ll be 65 to enjoy the next upswing wouldjya! Then stop and play some golf and enjoy the grand kids! Sell the blog for huge dough, blogs should be sellable by then!
TJ–Further corrections may or may not be due in Coastal San Diego–If I were to speculate, I would say YES, they do–However, one thing is FOR SURE, today is certainly a better time to buy than it was 2 or 3 years ago!!! In comparison to markets such as Phoenix and Las Vegas, Coastal San Diego has NOT seen the inventory or the distress that those markets have, PERIOD. And I don’t think we will. There is pent-up demand from people from other markets who were priced-out of Coastal SD before, that will continue to add demand as prices drop.
Yes, it’s better than it was; yes, few places will see the devastation being wrought in PHX & LV; and yes, coastal SD will always rate a premium.
That said, prices are still far above where they will eventually be (barring Zimbabwe-esque printing, of course).
My house is holding steady at -10% (bought in 06, Encintas); however, I’m waiting for the ‘next wave’ so time will tell. Though at the end of the day, it really doesn’t matter because my community is great as long as the Unfriendlies are shut out. So I guess it is a good thing that those who can’t afford my neighborhood are no longer being subsidized. Unfortunately, the gov’t is still subsidizing some to stay rent free albeit not as much as other communities.
Though at the end of the day, it really doesn’t matter because my community is great as long as the Unfriendlies are shut out.
Who are “the Unfriendlies”?
We recently wanted to put an offer in on a “short sale” home we had been hoping would go up for sale. We had been watching for this home for two years. (The home has not been approved for short sale yet.) The real estate agent already had 5 offers and told us not to bother. He had made a deal with the seller to take the home off the market as soon as he got what he thought would be an acceptable offer for the bank. He was going to present the first offer and use the other 4 as backup and wasn’t interested in our all-cash offer. Is this ethical on the part of a realtor? He can decide which offer he wants to submit to the bank and stop additional bidders?
One thing the realtors aren’t saying is the only properties getting multiple offers are the ones that are…
Listings that don’t have a good combo of the above aren’t selling. No matter what local boy wants to mumbo jumbo.
Shaddash–Here is a copy of a post I placed about a week ago in response to how sellers in Carlsbad ought to be dramtically lowering their prices–not too much setting in this neck of the woods—
“Carlsbad Statistics (Single Family–all 4 zips)
I think the sellers in Carlsbad have been doing an excellent job pricing–in the last 3 months, 123 properties have closed escrow at 96% of asking price at a average price per sqft of $280 and 70 days on the market average (42 median)–not bad. 409 active listings with less than 3 months average market time, 155 houses currently in escrow with 52 days on the market average–Fairly healthy market–2.6 ratio of active/pending (single family).”