Homebuyers: To get the house, get there first

(Money Magazine)

Housing inventory is stiflingly tight in many locations, making it a challenge to find, much less land, your dream home.

The number of available houses in the hottest markets has dropped dramatically over the past year, says the National Association of Realtors: In the Boston area, for one, inventory levels are down 29% vs. 2012. And Denver, Seattle, and San Francisco aren't far behind.

"Some homes are flying off the market in a matter of days," says Paul Bishop, VP of research for NAR.
Shopping in a popular spot? You'll have to go beyond the usual sellers' market tactics, such as getting prequalified for a mortgage. These strategies will help you find homes first, stopping a bidding war before it starts.
Go unlisted
One way to head off the competition is to look for so-called pocket listings, homes that are for sale but don't show up on the multiple listing service, where brokers post available properties.
Owners may choose not to list because they want to keep details about their houses private, or simply because they don't want to deal with staging the home and taking photos, says Zillow contributor and agent Brendon DeSimone, who works in New York and California.
Related: Secret 'pocket listings' return in hot housing markets
To find these homes, you'll need a well-connected broker. "You want someone who has an inside track," says DeSimone. Agents who have experience with pocket listings should be able to tell you about examples of off-the-radar houses they've handled in the past, as well as any they are currently aware of (keep in mind that pocket listings are most common in areas with tight inventory).
A caution: Buyers considering an unlisted property should be on the lookout for defects and check that the price is in line with the area, says San Francisco broker Samuel Cadelinia. Owners sometimes use this low-profile method to avoid calling attention to a problem or to see if they can sell for more money.
Get the real-time scoop
Many would-be buyers depend on automatic search, a regular roundup of listings sent out by the local MLS. But by the time these emails go out to shoppers, included homes may have been online for hours or even days.
Ask your agent about real-time MLS alerts, emails that are sent the moment a new listing goes live. While not yet in all markets, the alerts are available in the San Francisco Bay area, Las Vegas, Columbus, parts of Connecticut, and more.
Related: 10 things to know about buying a home
Agents often have a home for 24 hours or so before entering it into the MLS, so your broker may be able to give you a heads-up on a house he just received. To increase your chances of getting that call, tell him that you'd like to be notified immediately, and be sure he knows exactly what type of house you're after.
See through bad listings
Don't be scared off by a hideous paint job, bad lighting, or unflattering photos. "Sometimes sellers don't listen to agents about getting the house ready for sale," says DeSimone.
In a tight market, he says, it's worth checking out marginal listings to avoid missing a badly packaged gem -- just factor in the price of any project required to bring the home up to snuff.

 

Céline Dion's $28 million island mansion

Set your search criteria a bit higher than your target price; you'll likely catch some overpriced homes that may eventually go for less. How will you know? The number of days on the market is one telltale sign, says Cadelinia.
Related: For sale by owner: Homeowners ditching brokers
For example, if most homes in the area are gone within a month but this one's been on the market for two, the owner may be willing to consider a lower offer. If the listing is new, get a sense of how realistic the cost is by comparing it with the recent sale price of similarly sized houses in the same area.
Spot would-be sellers
Finding a home that's not for sale but might be soon is tricky but not impossible.
One strategy: Ask your agent to search expired listings, says Mark Cenci, a Chillicothe, Ohio, realtor. Owners who tried to sell a couple of years ago may not be up on rising home values (June median home prices were 16% higher than two years prior, says the NAR) and might be swayed by what you're willing to pay.
Rental properties are another prospective target, since landlords may also be out of touch with current prices. Sure, it's a reach, but in this market, says Cenci, "you need to explore every option."

Strategy for a Multiple Offer SItuation

It is definitely a buyer’s market out there in San Carlos, so if you want to buy a home, chances are, there will be a lot of other buyers right behind you. If you think you have found the home of your dreams, what can you do to guarantee that you will get it over someone else?


You have to remember that there simply is no guarantee. There are many factors that go into putting a bid in on a house.

First off, work with a reputable, savvy agent. Have have them determine what the fair market value of the home is.  Review the disclosures so you are familiar with the condition of the home. Talk it over and decide what you are comfortable paying for the home.

A good agent will get as much information as possible from the listing agent so that your offer will be as strong as possible.  In addition to price, it is helpful to know what the ideal terms for the seller would be (close date, rent back, items to include/exclude, etc...) so they will be included in the offer.

If you are working with a lender, it is always helpful if it is a well known reputable one.  In addition to writing a pre-approval letter to submit with the offer, have them call the listing agent before you present the offer to let them know how highly qualified you are and confirm the terms.

If this is your dream home and you want it at all costs, then perhaps investing in inspections prior to writing the offer so that your offer does not need an inspection contingency.  If you have the means, you may also consider an escalation clause. (See my previous post on escalation clauses.)

As always, try to work with an experienced and trusted REALTOR®, who can ease the process for you. They can work with the seller, and hopefully, you can all come to a deal that will leave everyone happy.

We are experienced, trusted and happy to assist you!

Kelly Clarke MBA
Realtor
The Clarke Team
650-489-5399

What Is an Escalation Clause and When Should You Use One?

As real estate markets across the country heat up, competitive buying situations and bidding wars are becoming the norm. In many cities, the majority of new listings are receiving multiple offers. Real estate inventory continues to be extremely low, and growing buyer demand seems to be keeping pace with new homes coming on the market.
Home buyers in competitive situations are looking for any advantage that might win them their dream home over a competitor’s offer. Writing personalized home-buyer letters can create an emotional connection with sellers. Showing a clear picture of financial strength, whether through a strong pre-approval letter or proof of cash funding, can strengthen a buyer’s image.
Often, though, it all comes down to the final price. What a buyer is willing to pay for a home, versus a competing buyer’s offer, will be the deciding factor for the vast majority of sellers. When you’re deciding on what price to offer for a home, the situation may call for a single price or, in some cases, an escalation clause.
What Is an Escalation Clause?
An escalation clause is a real estate contract, sometimes called an escalator, that lets a home buyer say “I will pay x price for this home, but if the seller receives another offer that’s higher than mine, I’m willing to increase my offer to y price.”  In theory, an escalation clause is fairly simple. In practice, there are a lot of details involved.
How Does an Escalation Clause Work?
While escalation clauses vary significantly, the general escalation addendum has a few basic components:

• What is the original offer of purchase price?
• How much will that price be escalated above any other competitive bid?
• What is the maximum amount that the purchase price can reach in case of multiple offers?

For example, buyer Brown offers $100,000 for a home. Her Realtor adds an escalation clause that, in the case of a higher competing offer, will increase Brown’s offer in increments of $2,000 above the competing offer. Her escalation clause goes up to a maximum of $110,000.
If no other offers are submitted, Brown’s offer remains at $100,000. If buyer Green offers the seller $103,000, then Brown’s offer would automatically escalate to $2,000 above that, bringing Brown’s offer to $105,000. If buyer Orange offers $111,000 for the home, then Brown’s maximum of $110,000 will be eclipsed, and Orange will have the top offer.
Will the Seller Accept an Escalation Clause?
Some home sellers simply state that they will not accept an offer with an escalation clause. They would prefer that every buyer submits exactly what they’re willing to pay. Sellers sometimes prefer this method because it motivates buyers to outbid one another on the first try. It also streamlines the paperwork and the decision-making process.
Will There Definitely Be Multiple Offers?
Escalation clauses should only be used when the buyer is fairly confident that there will be multiple offers, or when the buyer expects to pay an escalated price. If a buyer submits an offer with an escalation clause, they’re laying all their cards on the table: The seller knows immediately how far the buyer will go to secure the home.
If that offer ends up being the only offer submitted, it technically remains at its original price. A Realtor representing the seller will know, however, to counteroffer to the buyer at a higher, escalated price, since the buyer is clearly willing to pay more. While there’s no guarantee that the buyer will agree to the higher price, it is likely that they will. A buyer gives up a lot of negotiating power and potentially leaves money on the table when using an escalation clause that goes unmet by a competitor.
Has the Seller’s Agent Clearly Stated a One-Day Review or Multiple Rounds of Offers?
In hot markets, there’s a wide variety of offer-review processes. Some state that the property is going on the market on Friday, and all offers will be reviewed the following Thursday. The seller and their Realtor will make a final decision that day. This situation can be ideal for the escalation clause, when a buyer knows it’s an all-or-nothing offer.
Other sellers take a back-and-forth approach. They may collect offers from buyers for one week, and then respond to a handful of the best offers by saying “Send us your highest and best offer.”  This technique is particularly disliked by many consumers and professionals for its lack of clarity, but it’s important to know that it exists.
Before writing an offer, a buyer’s Realtor can inquire to feel out the details and make sure the buyer is prepared for the situation. Writing an escalation clause on the initial offer in a multistage situation could put the buyer in a weak position during the second round. It’s perfectly legal for a seller’s Realtor, with the seller’s permission, to reveal to all potential buyers what the top initial offer is and to ask everyone to beat it. In this case, the escalation clause would flesh out that buyer’s maximum, and they would lose a competitive edge.
Bid With Careful Confidence and Know That Each Situation Is Unique
If you’re considering an escalation clause, your Realtor is probably knee-deep in researching the circumstances around the seller’s process of reviewing offers. The Realtor’s knowledge of normal practices and probable outcomes in your market will make your offer much more likely to succeed.
Escalation clauses can cause a lot of stress for home buyers, but when they’re boiled down to the basics, they’re fairly straightforward. Remember to be realistic, to be comfortable with how much you’re willing to offer, and to confidently go after a home at that price. Buyers shouldn’t be tempted to escalate their purchase price above what they are comfortable paying. At the same time, they should realize that inventory and interest rates are low, and aggressively pursuing a good home at a good price is necessary to winning in a competitive market. Potential buyers who are only looking to get a steal often end up not being buyers at all.
Sam DeBord is a Realtor® and managing broker at Coldwell Banker Danforth & Associates. Find him on SeattleHome.com.

How to Get Rid of Stuff and Declutter Your Life

How to Get Rid of Stuff and Declutter Your Life

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Noteshelf - iPad App to Help You With Your Home Search

Technology is changing the way we search for homes. First it was newspapers, then the Internet, now mobile devices like the iPad. Nowadays, your new home search doesn’t need to take place while sitting in your current home

NOTESHELF

Want a quick and easy way to make notes during an open house, or jot down features you’d like to have in your next home? Noteshelf is the easiest and smoothest note-taking app out there. You can use your finger to draw or an iPad stylus to create multiple notebooks. Then export your notes and share with me when we meet.

Cost = $4.99

Ease of Use = Simple

The Clarke Team
sold@clarketeam.com
650-489-5399

Does Your Home Have Nose Appeal?

This is a truly sensitive subject, but because everybody’s nose is different, what smells good to one person can ward off a potential buyer who thinks otherwise!

The smallest amount of odor can be off-putting to a buyer who steps into your home for the first time. Sometimes the difference between a potential sale and just another visitor begins with vacuuming and mopping your floors. And because clean homes sell faster—usually for their asking price or higher—that means you are able to close and move on quickly.

While you’re at it, we recommend ridding your home of any clutter—put it in storage if necessary— and deep clean your home to eliminate any lingering odors, like those caused by pets and smoke. A professional carpet cleaning will also brighten up your place and help the nose appeal of your home immeasurably! (Let us know if you need a recommendation.)

We are available to help you with many more proven tactics like these, to ensure that your home presents itself in the best way possible. Please call or e-mail me at your earliest convenience, we look forward to hearing from you.