By Alicia Kay Lanier, REALTOR
Not for the first time – and I’m sure not the last – I had home buyer clients ask me yesterday how they could get the winning offer among multiple offers which were pending on a house we had just toured.
As an aside, they then mentioned they do not want to pay more than list price.
Unfortunately that is not a winning buyer strategy right now – and definitely when there are multiple offers afoot. I see my job as not just finding newly listed homes and showing a property, but also providing the very real benefit of researching the immediate neighborhood and offering my opinion about a home’s value based on that research as well as my experience. If someone really wants to buy a home, I want to educate them about how to do that in this unique market.
It is understandable that no one wants to overpay for a property and that most buyers believe not paying more than list price feels like the best way to accomplish this goal. However, in this scorching hot home selling market in neighborhoods attracting multiple offers, buyers need to think of the situation as being at an auction where the list price is, frankly, more like an opening bid than a set-in-stone price.
In the case of yesterday’s home under discussion, the list price was well under the going rate for homes in this pretty North Carrollton neighborhood built in the mid-1980s. Our challenge, therefore, was to determine an appropriate purchase offer price price, one which would not be overpaying and would appraise by the Buyer’s lender, but also beat out the multiple offers already in competition.
The list price for my buyers’ chosen home was $190,000, which is not just below the selling prices for the neighborhood but under the listing prices as well. For example, all four of its recent SOLD homes were list priced above this property – and three of them sold over even those list prices. Here’s the rundown of the neighborhood SOLD homes in the past 6 months which were very similar, showing list and selling prices:
Comp #1: Listed at $195,000 (Sold at $201,900)
Comp #2: Listed at $210,000 (Sold at $207,000)
Comp #3: Listed at $205,000 (Sold a $210,000)
Comp #4: Listed at $215,000 (Sold at $227,500)
Looking at the prices for the SOLD homes, you can see that my buyers’ preferred property will appraise at over $200,000+, with value depending on its amenities and size as compared to those of the comparable homes. It is apparent to me as a professional REALTOR that this home was priced low strategically in order to let the buyer market tell them what it is actually worth. (Which is basically how home values are determined: How much a Buyer is willing to pay and how much a Seller is willing to accept.) So I advised my Buyers that submitting a purchase offer at their low list price in light of the much higher prices for the SOLD homes would be a waste of their time, especially since there are already multiple offers placed on this home and the Sellers have called for highest and best purchase offers.
There are still homes that can be bought for list price (and occasionally under), but not for homes in popular areas with routine multiple offers. Also, I want to point out that the low $200,000s) and their preferred configuration (3-bed, 2-bath, 2-car garage) is one of the most competitive price ranges for home buyers today.
Is price the only factor when competing in a multiple offer situation? Not at all. But, candidly, it is the biggest factor for Sellers, who naturally want to walk away with as much cash as possible. And, speaking of “cash”, a home buyer paying cash usually rises to the top – because a cash buyer can close quickly and there are no issues of lender approval and appraisal.
Here’s one tip that can make a Buyer stand out for the Seller: I always recommend that my clients write a letter about how much they like the house and neighborhood, mentioning specific features that stand out, and also include some personal information (job, hobbies, kids, etc). Most homeowners love their property and the memories made there and want to entrust it to an individual or family who will do the same.
I have earned a good track record in helping my clients win out in multiple offer situations. Did yesterday’s couple take my recommendations and get the home – or did they remain fixated on not paying more than the list price? Stay tuned …
UPDATE: 5/21/2016 My clients did decide to participate in the multiple offers bidding on this property and instructed me to write a purchase offer for $205,000 – which was $15,000 over the listed price. Sounds pretty competitive, doesn’t it? Unfortunately, as strong as their offer was, they were one of 17 prospective buyers bidding on this property; the winning bid: $217,500, which was $27,500 over the list price. Will it appraise? If not, will the Buyers move forward with the purchase? We shall see…
Alicia Kay Lanier, REALTOR, is affiliated with Coldwell Banker Residential. She works with both Home Sellers and Home Buyers in four North Texas counties: Dallas, Denton, Collin, Tarrant. Contact her at Alicia.Lanier@cbdfw.com or 972-998-8751.