It’s a seller’s market in many places these days. The good news is buyers who have been on the fence waiting for interest rates and prices to bottom out are back in the market. The bad news for those buyers is inventory levels are at all-time lows. In Plano Texas, new listings are sold in hours with multiple offers. One new listing a few weeks ago had 34 offers in the first two days!
The impact is two-fold. First, buyers are driving up the prices of homes to the point where they will not appraise for the sales price. Second, for every buyer who manages to enter into a contract, many more are left dismayed that they cannot find a home. I had one buyer last week who offered $15k over list price on a $310k home and their offer was not the highest offer.
While it often would appear that the offer with the highest price is the accepted offer, that’s not always true. Sellers often consider other terms in addition to price:
Title Policy – In Plano Texas it is customary for the seller to pay for the title policy. On a $300k home, that policy costs the seller $1911. The buyer can make their offer look stronger by paying for the title policy. I recently sold my personal home and the offer I accepted was not the highest offer. I was really concerned about appraisal issues so I took a slightly lower offer that paid for the title policy (among other things) since those items added to my bottom line without raising the sale price of the home.
Possession Date – Typically the buyer takes possession at closing and funding. Many sellers are moving into new homes so being flexible with the closing date and allowing a seller lease-back can make a buyer’s offer stronger. I recently had a seller who was willing to move out of their home at closing and funding, stay in a short-term lease for 90 days, and place most of their furniture into storage. A smart cash buyer came in with an offer that included a 90 day lease-back. While it was not the highest offer, it was the accepted offer.
Residential Service Contracts and Homeowners Association Resale Certificates – These costs are typically paid for by the seller and can often add $1000 to the seller’s closing costs. Smart buyers are paying for their own residential service contracts and offering to pay for the resale certificates. This adds to the seller’s bottom line by reducing their closing costs.
Smart buyers can get their offers accepted in a tight market. It’s not always about the price!
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Lately, many buyers have experienced the “multiple offer” notice after making an offer on a home. The notice usually asks the buyer to make their “highest and best” offer by a certain date.
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