Three Buying Scenarios; One Winning Strategy

There is a lot of advice on how to win a multiple bid scenario (escalation clause, humanize the buyer with a letter to the seller, snipe the competing buyers, etc…).

In this blog post, I am only going to talk about one strategy that you can use effectively without overpaying and even if you don’t have unlimited funds.

1.)  I currently have a sale pending on a listing where the seller accepted an offer lower than I would have guessed.

Buyer offered cash, close in 14 days, no inspection contingency, and put 75% of the sales price down as the earnest money escrow deposit. That convinced the seller this was as close to a done deal as you can get before actually closing, so after a little negotiation, they signed a contract.

A clean offer with strong deposit is an obvious winning strategy.

2.)  Years ago I showed a home that was priced to sell quickly, to a buyer who was philosophically opposed to paying more than list price, even though he admitted it was worth more than asking price. His wife warned him that if he lost this home because of his foolish pride, he was going to regret it.

The other offer was above list price. Our full-price offer included a $50,000 earnest money escrow deposit which was almost 50% of the sales price. Money talks and the seller accepted our lower offer with the big earnest check attached.

What if you are not a cash buyer with the ability to lay down the big money smack?

Do what you can to make your offer stand out.

3.)  I just closed on a home that had competing offers that were almost identical. Both had financing contingencies, low down payment loans, and were full price.

What made one stand out? Offer A had a $500 escrow deposit, offer B had a $3,000 deposit.

Sure, that is only a $2,500 difference, but if you multiply those numbers by ten, it is like comparing $5,000 to $30,000. A significant difference!

Even the $2,500 difference caused the seller to decide, “Buyer B seems more committed, let’s go with that one.”

In the old days, 10% of the sales price was common for the deposit. We went through a period during the easy money boom years where a token $1,000 deposit was common. That might be a serious commitment from a buyer who is going for a ‘no money down’ loan, or 3-5% down payment financing.

However, if you are a cash buyer or getting a conventional 20% down loan, and you offer a token deposit with your offer, you should not expect to be taken seriously.

I send a bi-weekly, digital newsletter with insights into the real estate market, as well as helpful hints, tips and trends for homeowners. If you would like to receive it, just send me a message with your email and I will add you to the next mailing.

All the Best!

Jim Sweat, ABR, CLHMS, CRS, CDPE, GRI, e-PRO, ILHM

REALTOR

Featured in Scene Magazine’s Men on the Scene 2016 issue

Author of REAL ESTATE CSI: CONTROVERSY, SECRETS, INSIGHT (coming soon)

Jim Sweat – Helping Buyers & Sellers Choose Wisely Since 1995 ™”

Re/Max Alliance Group

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Is This Another Real Estate Bubble?

Two questions need to be answered when multiple offers, bidding wars, tight inventory, and Realtors buying properties become the norm.

We have been seeing strong demand and rising prices for the last three years. The real estate market in Southwest Florida was decimated during the real estate crash, so it is not only reasonable, but also smart, to be alert for signs of danger. Values dropped by over fifty percent from the boom prices of 2005 to the depths of despair in 2011.

Many have been asking if the bidding wars we are seeing are leading to another bubble. Multiple offers are a sign of strong demand, which we definitely have.

There is one irrefutable sign when prices are not sustainable. I will get to that in a moment, first you need to know the two most important questions to ask:

  1. Who?
  2. Why?

Who is buying real estate, and why are they buying it? If you pay attention to the answers, you will have a good grasp on the overall health of the real estate market.

During an eight month period of 2014, over half of the agents in my office bought real estate. Now, we have a small office, still you had six agents buy property in a short period of time. Is that a warning sign?

It could be. The first wave of foreclosures during the crash was heavily populated with agent owned properties. I cover that in more depth in my upcoming book, Real Estate CSI: Controversy, Secrets, Insight. A real estate agent exposes dangers and dirty tricks that cost you money.

The second question determines if that is cause for alarm. Why? Answer: We all bought real estate to own it. None of those purchases was for a flip, or an attempt to get into the chain of title for profit. We all wanted to own the properties we bought.

That is a strong indicator of healthy market growth ahead.

During the boom, everyone was buying real estate. Anyone who could fog a mirror was clamoring to grab the next property available, and many times contracts were selling multiple times before the first closing even took place. Properties weren’t even changing hands. Just the contract to purchase was being sold at a profit to someone else.

Who? Everyone.

Why? For fast money. They didn’t want to own the property; they only wanted to get their name on a contract that could be sold tomorrow for more money.

The most important sign among the many:

When “everyone” is buying, but few actually want to own it, that is a bad sign.

So who is buying real estate today, besides half of our office? Baby boomers; early retirees; investors; snowbirds; first time buyers; move up buyers; people who love Florida and want to enjoy it for more than a couple of weeks a year; and the occasional flipper.

These are good people to see spending their money in the marketplace, and a sign that bodes well for the future.

Respectfully,

Jim Sweat, ABR, CRS, CDPE, GRI, e-PRO, ILHM

REALTOR

Author of REAL ESTATE CSI: CONTROVERSY, SECRETS, INSIGHT (coming soon)

American Realty of Venice, Inc.

700 W. Venice Ave

Venice, FL 34285

941-484-8080

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