Whether you’re a first time buyer or haven’t purchased in 10 years, much like a new born baby, there are things to learn or re-learn. I want to walk you through a few things you should know before and during the purchase of a resale (not new build) home.
Before:
Broker up
The first thing you need to do is find out how much you can really afford. Ideally this is done before you start looking because I would hate to get your hopes up if you find the perfect home, only to find out you can’t afford it. This may seem like a daunting step, but I promise, once you know how much you can afford, it is actually reassuring. Knowledge is power. If you don’t have a broker, feel free to reach out to me and I can connect you with some great brokers who have helped my clients in the past.
Your Deposit and Making it Liquid
So now you know how much you can afford. You’ve found a home and you want to make an offer on it. Did you know that part of the offer process requires a deposit? Think about it, if a deposit wasn’t required, anyone could put an offer on a house with no recourse. A deposit shows the seller you are so serious that you are willing to lose the deposit if you backed out. Now, how much deposit do you need? While there is no hard and fast rule, 5% is quickly becoming the industry standard. In fact, on offer nights, most listing agents demand that a 5% deposit be included with the offer and they often ask that an image of the draft be included with the offer. Only serious offers are considered in this market, and that is one way to show you mean business. So what do you need to do to prepare? Make sure your 5% deposit is liquid. Have your deposit tied up in investments? Make sure it’s cashed out. Will you be drawing your deposit from the equity in your current home? Make sure you have a Home Equity Line of Credit with enough of a balance that you can draw from. Sales of homes are moving so fast, you don’t want to miss out on an offer night because you don’t have your finances in order.
During
Offer Nights
Ah, yes. The dreaded offer night. In this seller’s market, I would seriously question your Realtor if you’re putting your house up for sale and they weren’t doing an offer night. Offer nights allow buyers enough time to view the listing and know when to submit the offer. It gives sellers the opportunity to view all offers at once and choose the best one for themselves. The listing agent often sets out the ‘rules’ for offer night in an email to your Realtor, advising when an offer needs to be submitted, and what is required. Because demand is so high, there are often multiple bids on the same house, so it is imperative to submit your best offer, as sometimes, the seller will just go with the highest price, not giving you the opportunity to improve on your price. In a balanced market, where supply = demand, buyers have the opportunity to negotiate during a back and forth process with the seller. This is not that market. If you do not give your best offer up front, you risk the chance of not even being in consideration.
Bully or Pre-emptive offers
You’ve got your financing in order, you deposit ready, and you’re waiting for offer night. What’s that? Offer night has been moved up to today because someone has submitted a pre-emptive offer?!?!?! This is a stressful but all too familiar occurrence these days. Buyers are so sick of losing out on homes, that they resort to submitting a “bully” offer to try to avoid the competition of an offer night. In this situation, the listing agent will notify all potential buyers that the offer night has been moved up to the current day, as the bully offer will most likely have an irrevocable (when the offer expires) of the same day. If you are thinking of submitting a bully offer, here’s what you need to consider: your offer has to be so good, its above and beyond what the seller thought they could get for their house. I advise my clients only to submit a bully offer if it is too good for the seller to give up, otherwise, they’ve shown their hand and the seller knows what to expect on offer night. Sometimes a listing will say “no pre-emptive offers allowed” and lo and behold, someone submits a pre-emptive offer anyway.
No Offer night
You’ve found that magical unicorn listing that doesn’t have an offer night! Hooray! You can breathe a sigh of relief. Take your time. Submit an offer when you’re ready…not quite. Most listings that don’t have an offer night get scooped up THE VERY SAME DAY THEY ARE LISTED. Why is this happening? Often, a listing will show up with no offer night because they already tried an offer night and didn’t get what they want, so they relist it at what they actually want to sell it at. A person who had already gone to see this house, and didn’t get it, is often sitting on the sidelines, waiting to scoop it up.
Representing Yourself
You’re smart. You study the market. You know what price you should offer. And heck, the listing agent will be so happy to tell their clients they don’t have to pay you any commission. Think you’ve got it in the bag? Not so fast. Most agents know they can net their client so much more money on an offer night then anything they would save by doing it privately. They won’t even let Realtors reduce their commissions on offer night, so as to keep an even playing field. In this market you need to be represented by someone educated and connected, and who has access to all the information about offer nights and any pre-emptive offer that come in.
If I can leave you with the most important piece of information to buying in this market its to be ready and act fast. Inventory is flying off the shelves, so you must be mentally and financially prepared to act quickly.
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