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What Buyers Can Do to Get Ahead in a Seller’s Market
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.
Portland Real Estate: Why It’s Not A Bubble
KGW recently reported that Portland has the fastest-rising home prices in the United States. Check out this graph representing Multnomah County. The line at the top is the average sold-price-to-asking-price percentage, and the bars represent days on the market.
It's incredible! Days on the market — from listing to closing! — is averaging less than a month. And the average sale price — AVERAGE — is above the asking price. Houses in Portland are selling immediately, and they're selling above list price in nearly every case. It's hard not to wonder when this bubble will burst and the market will crash again. This momentum can't last forever, can it?
Well, the pace of growth probably will slow down eventually, but I'm confident this is NOT a bubble, and we're not headed for a crash anytime soon. Here's why:
- Buyers are paying cash. Approximately one-quarter of all Portland home sales in 2015 were all-cash offers. When a buyer pays cash, there's no mortgage on which they risk defaulting. The house is paid for and the money is accounted for.
- Mortgages are stronger and more secure than they were before the last crash. The last crash in the late 2000's was largely due to irresponsible lending and borrowing. Whether the banks paid fairly for their part in the crisis is up for debate, but they absolutely learned a lesson about making flimsy loans. And just in case they didn't, the government put new restrictions in place to ensure that future mortgages meet higher standards. The result is that it is more difficult to get a mortgage, but those who do qualify are sound borrowers — much less likely to default.
- Portland is the greatest city in the world, so of course it's growing. Okay, this last point is just my opinion rather than a strict fact, but it is an opinion shared by many! This is a great city, and even though prices are rising fast, the cost of living remains much lower than in many other big cities.
As prices continue to rise, the growth momentum will probably slow somewhat, but this is not a market that's headed for a nosedive. We can expect it to level off at some point — no one can predict when, but based on current trends, that still seems a long time from now. But unlike the wild real estate market of 2005, 2006, the money is there to back up the purchases this time around. We're not going to see a big wave of foreclosures and short sales. At worst, there may be a plateau coming, where prices don't rise and the homes for sale stay on the market a little longer.
If you're waiting to buy because you're expecting prices to drop, you'll likely be waiting a long time. This is no bubble.
That’s So Portland!
When I talk to my friends about my life in Portland, I hear the phrase "That's so Portland!" all the time. This city is full of unique opportunities and experiences, and living here, it's easy to take for granted just how unusual — not to mention fun, interesting, exciting — my routine can be.
We've got all the usual big city stuff, so if you want to live a normal life in Portland, you certainly can. But whatever your quirks and interests, there's a niche for you here. Talking with my friends about New Years resolutions, we got into discussions about what we were working on to be more fit. Some friends run, others go to crossfit gyms, but then there's the guy who's taking partner acrobatics classes, my girlfriend who is getting really into roller derby, and another friend who is taking a men's burlesque class (he's also joined a ukelele jam band). That's so Portland.
I made it a goal for myself this year to take advantage of more "That's so Portland!" opportunities. I asked my local friends for suggestions for more Portlandy ideas. Last weekend I went to a demonstration for a glass art school. In a couple of weeks, I'll be running in The Worst Day of the Year 5K, where runners dress in wild costumes and celebrate the dumpy January weather. Because why not? And there's a new food truck I have to try — PBJ's Grilled, gourmet grilled peanut butter and jelly sandwiches. Maybe this summer I'll learn to ride a unicycle.
What are your "That's so Portland!" experiences?
It looks like sound check before a concert, but they're actually getting ready to run in the Starlight Run, one of many annual costume 5K races in Portland. Photo by Swanny Mouton on Flickr
How Accurate is Portlandia?
People who have never been here often ask me if Portland is anything like the satirical comedy Portlandia. Of course it is, or the jokes wouldn't make any sense. Maybe they don't make any sense anyway, but that's one of my favorite things about this place. It's okay not to make sense sometimes.
I usually tell people that Portlandia is as much a documentary as it is a satire. Portlanders revel in their otherness. We want to Keep Portland Weird, after all. If you want the Portlandia life, you can definitely find it here — but you don't have to, either. We celebrate differentness and individual creative expression in Portland, but along with that mindset comes the philosophy that you can live however you want — even traditionally — and that's okay here. If you want a white picket fence and two-and-a-half kids to put in your minivan, that fits in, too.
You can't live in Portland without at least a little bit of the Portlandia experience — you will likely get passed on the sidewalk by a bagpipe-playing unicyclist, or by a hipster walking his pig — but we'll welcome you to our city even if you don't commute by skateboard or sport purple hair.
What is Rip City?
You're probably aware of Portland's many nicknames: Rose City, Stumptown, Portlandia, Bridgetown, Beervana…each has its own significance in our city's lore, but one that may not make sense to you is Rip City. Why Rip City? What does Rip City mean?
Originally, it didn't mean anything, but it quickly gained great significance for Portland Trailblazers fans. In the Blazers' inaugural season, in a 1970 home game against the Lakers, Jim Barnett hit a game-tying long-distance jumper. The crowd erupted and announcer Bill Schonely yelled "RIP CITY!" Schonely admits it just came out — and colleagues encouraged him to keep using the phrase. In the 44 seasons since that moment, "Rip City" has become synonymous with Portland Trail Blazes Basketball, and the city of Portland itself.
Not every Portlander is a Blazers nut, but you wouldn't know that from inside the Moda Center. It's a truly magical environment, and while I admit some bias here, I do believe Blazer fans make up the best crowds in all of sports. The Blazers are our only major professional sports team, and we love them dearly. (Portland also has the Timbers and the Thorns of professional men's and women's soccer, but as far as "Big Four" sports, it's just Blazers here.) Inside the arena and all aound the city, Blazers fans make up a really wonderful community — a community now known as Rip City.
A Few of My Favorite Portland Things: Mountains
Photo by Flickr user Mulling It Over
The Cascades are different, though. The volcanic peaks that rise high above the rest of the mountain range every 50 miles or so are like giants. The Rockies are taller, sure, but they're ALL tall. Oregon's peaks are exceptional because of the way they stand alone. I've always thought that Mount Hood seems to stand guard over Portland. This mountain is, in my opinion, the most stunning element of our gorgeous city.
Over time, I fell in love with nearly everything about Portland, but it was Mount Hood that drew me here, 2800 miles from the Blue Ridge foothills I once called home. A view of the mountain was a prerequisite for my home here in Oregon. It doesn't always show itself from behind the clouds, but on clear mornings when I first wake up to see the sun rising behind Hood, it still takes my breath away, seven years after my first encounter.
