Strategies for a Seller's Market

By
Real Estate Agent with Broker/Owner, Keller Williams 100000008

Hello everyone!  I really appreciate you taking the time to read this! 

Here we are in Mid May.  The true HEART of the selling season.  And what a selling season it has been so far.  I've been a broker for about 9 years, and I have never seen anything like this.  I figured I would check in with some of the "old time" agents that have been around for 30+ years.  I wanted to ask them what they thought about our market.  Every one of them said the same thing.  Craziest seller's market of all time. 

So we adapt to circumstances.  For buyers....I prepare them right from the very start.  Not letting them do anything without being solidly pre-approved with a good lender that I trust.  Educating them about the market and what to expect.  Bolstering their patience and letting them know that it might take a while and multiple different homes and contracts before we get something for them.  Talking them off the ledge over and over. 

And we come up with strategies.  In this multiple offer, going for over asking price environment, we have to do everything we can to get our buyers under contract.  If my buyer tells me "this is the one, we need to get this house" there are certain things we can do to increase our odds of getting it under contract.  Here is a standard scenario we are seeing over and over: a $250,000 house comes on the market at 9am today.  There are 15 showings by 5pm and 3 offers (no joke, this is reality in northern CO).  If my buyer wants this place, clearly they have to compete.  So the first thing I will do is call the seller's agent and ask them what a perfect contract for their client will look like.  They'll tell me their client's preferred terms, timeframes, etc.  I will make sure I know how many other offers we are going up against (in this case, assume we are up against 3 others).  I will try to get the other agent to give me a ballpark idea of what the 3 other offers look like price-wise (they shouldn't tell me this but you would be shocked at the loose lips out there). Then we will work on our contract.  My buyer has 20% down, doing a conventional loan, with no contingency, in other words they don't have to sell something to be able to buy this house.  Let's assume the seller's agent told me that of the three offers, they are all at or above asking price, which is a likely scenario.  So...I will recommend to my buyer that we write our offer for $252,000.  And here is where the strategy comes in.  We will put an escalation clause into our offer which states that we will pay $1000 more than any other bona-fide competing offer, up to whatever price my client is comfortable with.  If the seller chooses to "use" our escalation clause and increase the price and take our offer, they will have to show us the competing offer, in other words they cannot just increase the price without proof of the other offer.  Even with a super strong offer like that, we could very easily lose out to a full price cash offer that doesn't need financing.  If I am a seller, I am going to take a $250,000 cash offer over even a $255,000 financed offer.

Clearly it's a great time to sell a house here in northern CO.  But there are also strategies that we have to use with our sellers.  Assuming they are going to list their house and it will get under contract almost immediately, if my seller has to buy a house in town here for their exit strategy, they are now thrust into the same position all the other buyers are (unless they can afford to buy above $500,000 in which case they are truly in a "sweet spot" in the market because there is inventory).  With the last 2 homes I listed, I put a condition in there to help my sellers out.  It went something like this: "seller will only consider contracts that allow them to "rent back" the property after closing for up to 60 days".  What I am basically doing is buying my client about 90 days to find their replacement property.  Generally it is about 30 days from contract to closing, and then they get the 60 days after to rent the property back from the new owner if they need it.  This allows my people enough time to ensure that they are not HOMELESS after closing!  And it really helps them out to be closed on their old house, not having to sell to be able to buy the new house.  That contingency can kill any offer, with sellers having their pick of the litter on these contracts, being non-contingent is huge. 

These are just some of the strategies that I have been using with my clients, I have some other tricks up my sleeve too but I don't want to write a novel about it.  Adapting to a dynamic market is crucially important; it certainly isn't business as usual around here! 

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Ben Blonder

Owner/Managing Broker, Kapital Real Estate Inc

Office: 970-797-2190

Cell: 970-420-6166

ben_blonder@yahoo.com

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Tags:
selling
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Rainmaker
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Richard Weeks
Dallas, TX
REALTOR®, Broker

The Texas Real Estate Commission has advised Texas agents that esculation clauses are not to be used.

Oct 19, 2013 11:36 PM #1
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