You've no doubt heard that it's a hot real estate market here in Portland right now. Last week I wrote about how quickly everything is selling in Portland. When we talk about a hot market, though, we mean it's a hot time to sell. For buyers, though, it means more competition and, often, more difficulty.
A lot of buyers are just not prepared for the challenges they'll face when they make their first offer in a market like this. They expect to be able to come in with a low-ball offer and take negotiations from there when the seller counters. But that's just not wise in a market where nearly every seller is seeing multiple offers for their property, often as soon as it hits the market. When they have lots of offers to choose from — I've seen properties get more than 15 offers several times in the last year — sellers are not going to bother negotiating with everyone. They're going to pick the offer they like best, maybe keep one or two as backups, and reject the others.
It's important for you as a buyer to understand these conditions, so that when you are ready to write an offer, you have your best shot at getting it accepted. So what do you need?
- PROOF OF FUNDS — Aboslutely the most important thing going into an offer is to have your finances figured out in advance. If you're paying cash, you'll need to prove you have the cash. If you're using a loan, you'll need a pre-approval letter. Have your lender provide you with pre-approval letters at several different price points, so that when you find what you want, you've got the pre-approval to submit with your offer immediately, and you don't have to rush to get something in writing from your lender before a tight deadline.
- BE READY TO ACT — Houses are selling faster than ever right now. That means that you just don't have time to look at it on the internet, set an appointment to view it in two weeks when you're free, and then think about it for a couple more weeks. It will more than likely be long off the market by then. Know what you want, where you're willing to compromise, and if a listing comes up that interests you, check it out immediately. When you find something that fits your criteria, be ready to write your offer that day. You will have chances to back out if you get cold feet later, but you'll have a hard time getting a contract if you can't move quickly.
- HIGHEST & BEST — Most sellers right now are not just considering the first offer they get. They'll set a window of time for potential buyers to see the house and submit offers, and they'll review them once they have several to choose from — they almost always do. If you really want to get the contract, you have to bring your very best offer immediately. Think of it this way: if you offer $450,000 for a house, but the winning bid is $460,000, are you going to wish you'd offered more? Then you should offer at least $460,000. If the winning bid is $465,000, now are you upset you didn't offer higher, or just sad that it ended up being out of your range? Find the top of what you'd be willing to pay, and write that into your offer. Remember that there are opportunities to negotiate further on price if something comes up during your inspection.
- LIMIT CONTINGENCIES — The fewer hurdles the seller has to clear to close the deal, the better. Is your offer contingent on selling another property first? Don't expect to beat an offer that can close immediately. Are you asking for the seller to cover closing costs? They're going to see how that affects the bottom line, and your purchase price offer has to be high enough to beat out a buyer who offers less but covers their own closing costs. I will never recommend to a client that they waive the inspection. Sellers are thrilled if you're willing to do that, but it's just too risky. If the seller needs you to waive the inspection in order to make the deal happen, I advise you to move on. This is not a place for compromise.
It's so easy to see what you think is the perfect house, and before you sign your offer, you're already envisioning your life there. Try not to get too attached. It's heartbreaking to miss out on a house you love, but in this market, buyers rarely win their first offer. Just remember that new houses are coming on the market every day, and as long as you follow the above guidelines, you will get something great. When you work with me, I'll guide you through the process, and I won't let you settle for something you don't love just because you're getting market fatigue. This is your home we're talking about! Hang in there, and it will be worth it when you sign those closing documents.