Los Angeles Real Estate
Zsuzsanna Nagy
(818) 481-1602(818) 481-1602

Buyers or Sellers Market (must read!)

Making an Offer – How’s the Market?

The market is determined by supply and demand.  In real estate, the relationship between supply and demand is calculated as “available inventory.” At the current sales pace, how long would it take to sell the total number of houses available on the market? That is how the real estate industry measures inventory.

Inventory is measured in weeks and months. Longer inventory times are associated with buyers’ markets. Shorter inventory periods are associated with sellers’ markets. Some buyers and sellers hope to time their purchase to take advantage of market cycles.

Markets can change almost overnight. When the market changes to a seller’s market, a buyer’s home buying strategy needs to change with it. In a seller’s market, a home buyer is unlikely to be successful using the same techniques practiced in a buyer’s market.

Making an Offer in a Buyers’ Market

Buyers’ markets exist when there are a lot of homes on the market and very few buyers. If inventory–the number of homes on the market in your neighborhood–has been rising, it’s likely that the days on market have been increasing. Couple that with declining sales figures over previous months, and home buyers are in an enviable position to negotiate. Here is how I can team with you to write a buyer’s offer to your advantage.

1. Request E-Mail Listings & Updates

Almost 80% of home buyers today start a home search online. However, many buyers are unaware that the data they are viewing could be dated. Many Web sites reboot every 24 hours. On other sites, agents sometimes leave expired and sold listings as active, hoping for ad calls. To avoid wasting your time, I can register your e-mail address so you can receive daily MLS changes of reduced prices and new listings. This is one way to gain access to the same data agents receive.

2. Tour Price Reductions

If you’re like most buyers, you will want to offer less than asking price. It’s just human nature. But if you plan to low-ball, you’ll probably be unsuccessful at getting that type of offer accepted if the home was just listed. Instead, tour homes that have had recent price reductions or have been on the market for at least 30 days or more. These sellers are more likely to be receptive to a low-ball offer.

3. Obtain Comparable Sales

When you find a home you want to buy, I will print out a list of similar homes in the same neighborhood over the last six months sorted by:

• Active Listings

• Pending Sales

• Sold

The list will contain the following specifics:

• Property Address

• Age

• Square Footage

• Lot size

• Bedrooms & Baths

• Sales Price

Compare this data with online home value sites such as Zillow, and you’ll see first-hand why the data I will give you will be more accurate.

4. Request Contingencies

In a buyers’ market, you’re in control. We will write your offer contingent upon the property appraising at the agreed upon sales price and on obtaining your loan. We will ask for a reasonable period to conduct inspections and to approve title, geological and pest reports. Ordinarily, during contingency periods, buyers can back out without risking a good faith deposit.

5. Ask for an Allowance or Credit

If you find the perfect home but you don’t like the color or condition of the carpet, for example, we will ask the seller to give you a carpeting allowance in your offer. We can ask for more than it will cost to repair or replace an item to cover your “hassle” factor. Many lenders let borrowers receive up to 6% of the sales price as a cash credit against closing costs.

6. Reduce Your Closing Costs

Depending on your local area, there may be fees associated with closing that are customarily paid by the buyer such as title insurance, property taxes, recording fees or escrow. In a buyers’ market, we can ask the seller to pay those closing costs. Typically, those costs can add up to one or two percent of the sales price and are often paid out-of-pocket by buyers. I can tell you if these fees are negotiable. Then ask the seller to pay them.

7. Renegotiate After Home Inspections

All buyers should obtain a home inspection. Most contracts give buyers the right to cancel a contract if the home inspection reveals repairs or defects that are unacceptable to a buyer. However, if the repairs are minor, you might want to renegotiate the sales price or ask for a credit against your closing costs. Caution: don’t ask for a price reduction if the repairs were evident when you first saw the home or the seller might not be willing to negotiate with you.

8. Request Extras

Sellers realize that in buyers’ markets, often they have to give a little something extra to the buyers to entice a sale. We won’t be afraid to ask for a home warranty protection plan that covers you in the event an appliance breaks down or the plumbing or heating malfunctions. Normally these plans protect you for one full year from the date of closing.

 Making an Offer in a Sellers’ Market

During sellers’ markets, homes sell quickly and sellers have a lot of pricing power. As a result, prices rise more rapidly than at other times. During buyers’ markets, homes may sit on the market for a while before selling, so sellers become more flexible and may even drop their prices.When the market is a sellers’ market you will often find that homes for sale have multiple offers within days of being listed.To try and ensure that you are the lucky buyer here are a number of things to help you gain an advantage over other people looking to purchase homes.

1. Don’t get caught off guard

A home buyer does not want to be caught off guard in a seller’s market. It’s one of the reasons that the most important thing a home buyer can do is trust his or her real estate agent to advise on market conditions. If it is a seller’s market, it could very difficult, if not almost impossible; to buy the first home a buyer wants to buy.

Jump on that Seller’s Market Showing. Don’t be that buyer who wants to wait until the weekend to view a home in a seller’s market. By the weekend, that home could be sold. Try to be one of the first showings. Sellers usually don’t enjoy having buyers come through their homes at all hours of the day, so most would like to see their home sold quickly. I can show you properties immediately and sometimes even before they hit the MLS.

2. Get a prequalification letter from your lender.

The seller will see you as being serious and they will know you can afford the home. If your preapproval letter is from an out-of-area broker or lender, get a local preapproval instead. Match your preapproval letter to your sales price and date it the same day as your offer. Click here to get pre-qualified quickly.

3. Stay on top of new home listings

Almost 80% of home buyers today start a home search online. However, many buyers are unaware that the data they are viewing could be dated. Many Web sites reboot every 24 hours. On other sites, agents sometimes leave expired and sold listings as active, hoping for ad calls. To avoid wasting your time, I can register your e-mail address so you can receive daily MLS changes of reduced prices and new listings. This is one way to gain access to the same data agents receive.

4. Be prepared to make a quick decision.

Know what you are looking for, what the must haves are and what features are optional. We will review your needs in advance so that we can make a fast (but not hasty) decision. Time is of the essence. Multiple offers happen with more regularity in a sellers’ market than a buyer’s market. That’s because by its very nature a seller’s market is defined in part by low inventory and lots of home buyers. A beautiful home that is priced well can attract more than one offer. Remember, you might not be the only buyer.

5. Put in a Smart Offer.

We will thorough evaluate the offer price. In a sellers’ market we may not put in a really low offer. In a slow market a low ball offer may be accepted, but in a sellers’ market when they are likely to have multiple offers a low offer may have little or no chance.

When we make an offer we may want to keep any contingencies to a minimum. If we add too many contingencies, for example, closing costs, or closing on a specific date, our offer may not seem as appealing as others.

Price. Price is not always the most important factor. Realize we may need to offer more than the amount the seller is asking.

Earnest Money Deposit. A larger earnest money deposit might look very attractive to a seller. I will give advice on the deposit; perhaps doubling or tripling the required amount. You’re going to pay it anyway at closing.

Don’t Request Favors. This is not the time to ask the seller to give you the refrigerator or washer and dryer, or part with fixtures, or paint the front door.

Delay Buyer Possession. If it is customary for the seller to move at closing, give the seller a few extra days to move. Another buyer probably won’t think of this maneuver, and the seller will look more kindly upon an offer that lets them move at leisure.

6. Obtain Offer Tips from the Listing Agent

I will call the listing agent for offer tips. Listing agents are often very busy. If I can save the listing agent some time by preparing the offer correctly, the listing agent might be inclined to recommend our offer over an offer from another agent who did not complete the offer the way the seller expects.

Think of it this way. Say a listing agent has two offers. One is exactly the offer the seller would like to sign. The other offer is not, and the other offer would need a counter offer from the seller to compensate. Should the listing agent prepare a counter offer or should the buyer’s agent revise the offer?

In this situation, it is better for the buyer’s agent to revise the offer. It is faster. During the time it would take the listing agent to prepare a counter, send the counter offer for a signature, and then deliver the counter offer to the buyer’s agent, another full price could arrive. If you want to be the first offer, the best offer and the only offer the seller will accept, your offer needs to match the seller’s expectations.

If you wait for the seller to sign a counter offer, your offer could fall by the wayside. I will find out what the seller wants by calling the listing agent or by reading the verbiage and instructions in MLS. Ask to see the agent’s MLS information sheet. The agent’s MLS printout is probably different than the information a home buyer receives.

If you write a good offer, a fast offer and a clean offer, your chances of acceptance are far better than those of a buyer who is unprepared. It may astonish you to know how many buyers are often unprepared.