New Homebuying “Rules”

I came across this article and thought it was pretty spot-on.  I’ll speak for our market below.

5 New “Rules” for Homebuying

#1. Lowball offers won’t likely stick: There are a few times when the lowball offer will work.  Those “screaming deals” are becoming more infrequent.  With the stabilization of our market that I spoke of previously, I’m seeing a dip in the supply.  This dip means more competition.  The best bets for lowball offers?  Properties that are in immediate threat of foreclosure auction (often this will help a seller postpone the foreclosure with a last minute offer sent to the lender); properties with many days on market (DOM), especially if bank owned (REO) and sometimes vacant land.  Vacant land is still our softest segment, with many lots in competition.  Not all lots are created equally, however, and many owners selling vacant land in our marketplace are in an equity position to hold for a longer period of time.

#2. Get pre-approved:  This is very true for our area.  Many buyers are looking for an REO.  In order for agents to even submit an offer, we almost always have to have a lender pre-approval letter.  Sometimes a buyer even needs to pre-qualify with the bank holding the REO.  That doesn’t mean that you have to use THAT bank for your financing, but it does mean that you have to be completely qualified to purchase their homes.

#3. Get realistic about the market: Your Realtor should be able to provide a CMA for the property you’re looking to buy.  At the very least, you can ask for any comparable sales within the past 6 months.  Sometimes, it IS hard to find comps, and the CMA isn’t the tell-all for a value, but it does give a buyer sound knowledge in the market, and helps to avoid breaking rule #1.

#4. Expect some competition: I’m seeing many more instances of multiple offers.  In fact, the last 6 transactions I’ve had have been in a multiple offer situation.  Buyers must prepare themselves for this, and must know what they are willing to pay for a home before becoming emotionally entangled in a “bidder’s war”.  Having multiple offers also means that the TERMS of your offer can be just as important as price.  For example: A house listed at $115,000 has two offers. An offer of $105,000, cash, investor (non-occupant) with no contingencies and an offer of $110,000 100% financing, buyer is unqualified and has many contingencies.  When typically dealing with an REO owner, the first offer is more likely the one that will be accepted (notice that NEITHER is OVER the asking price?).  Make sure your writing your contract is as clean as you can make it when you’re competing.

#5. Conduct property research:  This is why there are inspection periods.  Even with REO property, the owners allow for a time period to conduct inspection.  Know when you’re writing an offer that you have this option, and you should use it.  Instead of WAITING to write an offer until your questions are completely answered, make an offer and UTILIZE your inspection period.  This means you won’t miss out on an opportunity, but you have sufficient time to know exactly what you’re getting.  This doesn’t mean that an REO lender will make repairs, normally REO property is sold AS-IS.  It just means you aren’t surprised with a broken furnace when you move in (January in Driggs make anyone shake in their boots?) and you have the opportunity to withdraw if you feel that it is too financially burdensome.

I feel like these are some great rules to follow.  What do you think?  Any rules you would add to the list?