Archives for April 2012

A Game Strategy For Multiple Offers

April 30, 2012 by admin

Last week I was out with clients looking at a house that had been on the market a total of 456 days. Granted it started out overpriced, and thorough numerous price reductions came to a price that the was more market friendly. Never did we think that when we submitted an offer on the home that we would receive the call that another offer had come in, and we were therefore facing a multiple offer situation.

The first question is – is the listing agent bluffing about the presence of another offer? My response to this is while that can not be absolutely ruled out, I trust the integrity of the agent on the other side, and considered the claim of another offer valid. A point regarding the disclosure of offers by the listing agent. According to the National Association Code Of ethics:

REALTORS, in response to inquiries from buyers or cooperating brokers shall, with the sellers’ approval, divulge the existence of offers on the property.”

In other words a listing agent is not obligated to divulge the presence of multiple offers without the consent of their selling clients. So being informed of multiple offers is not a given, but a welcome bit of information as negotiations get underway.

The next question is – what do we do next? An offer made in the absence of a competing offer is most likely going to more aggressive across the board in terms of price, terms, and conditions, so with guidance from the client as to their level of interest in the home we rethought our game strategy.

As with any offer, comparable sales for the property must be researched and discussed. Even in a multiple offer situation offering a higher price just to secure the property is not what I consider smart strategy. So the take away for price is to offer a market based price that is based upon recent sales data and area selling price to list price ratios.

A bit of a twist on the offering price can be proposed with what is known as A Price Escalation Addendum to The Agreement Of Sale. A price escalation clause allows the buyer to offer a price for fixed home, and under certain conditions have the price escalate up to a ceiling price limit.

For example – it is determined that a market based price for a given home is $100,000. The buyer is is an multiple offer situation. Direction has been given by the listing agent for all interested parties to come forth with their best and final offer for the property. The natural reaction is to come up with a fixed price say $96,000 for the property, and hope that is enough to win the price war.

Using a strategy of price escalation an offer can be submitted at a lower price – say $95,000 – and the buyer can still get the property. It works likes this, since you do not know what the competing offer is you do not have to totally abandon your initial price strategy. You do however need to establish what your maximum ceiling price for the property is, and by what dollar amount do you wish to beat the competing offer by, say $1,000. The beauty of this strategy is that if the competing offer is lower than your offer, you get the property at the fixed contract price of $95,000, and the escalation clause does not kick in.

The contract price of the property is only escalated if the competing offer exceeds your fixed contract price – which in this example it does – $96,000 versus $95,000. You have offered to beat the competing offer by $1,000, so in this scenario a price of $97,000 gets you the property. The Price Escalation Addendum also requires proof of the existence of the competing offer/s should the price get escalated.

I have used this strategy on several occasions in the recent past, and it has performed well – my clients got the property they desired without a run up in price.

Other ways to sweeten an offer in a competing offer situation:

– Make a strong deposit. Sellers are looking for security in a offer, a larger deposit can help

– Be flexible on the Settlement Date – if you can agree to a seller’s time frame it could win you the deal. It is not always about the money.

– Keep your inspection time frame a short a possible. I do not suggest you waive inspections, but do them as quickly as possible

– Write a note to the seller discussing what you love the home and why you think you deserve to be the next owners of the home – be sincere but not sappy

Be prepared and have a multiple offer price strategy in place as you look for the home of your dreams.

Wallingford Real Estate – Wallingford, PA 19086

The Return Of Multiple Offers

April 28, 2012 by admin

Wallingford Real Estate - Wallingford, PA - Multiple Offers - Bidding Wars

Multiple Offers Are Returning To The Marketplace

During the real estate sales boom several years ago it was not uncommon for homes to receive multiple offers on their first day on the market. This characterized a surging demand by buyers during the peak years, when everyone wanted to be a part of the game. Today multiple offers are thought to signify an increasing shortage of homes in many parts of the country.

While I would not whole heartily agree that we are facing a shortage of inventory locally, there is ample evidence to show that multiple offers are on the increase. In the past three weeks I have written three purchase contracts, and two of them involved multiple offers which were successfully negotiated. Fellow agents are also talking about encountering multiple bid scenarios. Locally I think multiple bid situations reflect a shortage of properly priced homes that have been readied properly by the sellers.

In many parts of the country inventory levels are declining for several reasons:

– Sellers have been unwilling to come to terms with the reality of prices in the current market and have taken their homes off the market in anticipation of higher prices somewhere down the road. To that point there are some predictions that on a national level the forecast of a 1% downturn in prices is now being forecast into a slight 1% gain in prices for the year.

– The return of investors to the market with all cash offers, also has contributed to quicker sales and a thinning of housing inventory.

– Fannie Mae, Freddie Mac, and many large banks have been slow to release their backlog of foreclosed properties to the market.

The Wall Street Journal reported this week that in their recent quarterly survey inventory levels in 28 markets that were measured nationwide, all reported that inventory levels are down sharply. At the height of the housing crisis in 2008 there was a 11.1 month supply of inventory, in March that inventory level had fallen to 6.3 months. As of today in Wallingford there is a 9.3 month supply of homes on the market.

A key point for buyers to remember is that a properly priced home that is in market ready condition is likely to attract a lot of interest in today’s market, and that multiple offer scenarios are a situation that you and your agent should be prepared and strategize for.

Wallingford Real Estate – Wallingford, PA 19086

Down Payment Amounts Remain Stable

April 24, 2012 by admin

: The Median Down Payment Is 11 Percent

Down payments greater than or equal to 20 percent were made by 34 percent of all residential home purchasers last month, a percentage that has remained relatively stable over the past year, according to the latest REALTOR® Confidence Index survey from the National Association of REALTORS®.

For both conventional and FHA loans, which require only a 3.5 percent down payment, NAR reported the median down payment for all buyers was 11 percent in 2010-2011. First time buyers put about 5 percent down in 2011. Repeat buyers, pooling equity with savings, typically put down about 15 percent.

The states with the highest median down payments were Washington, D.C. (13.5 percent), New York (13.47 percent), Hawaii (13.33 percent) and California (13.22 percent). The state with the lowest average down payment is North Dakota, where buyers put down an average of 11.34 percent.

Down payments are a major barrier to first-time buyers, whose market share has dwindled since the home buyer tax credits expired in 2010. Half of all potential buyers planning to buy in two years or more are waiting in part because they lack the money for a down payment or closing costs.

Wallingford Real Estate – Wallingford, PA 19086

Remembering Dick Clark In Wallingford

April 24, 2012 by admin

Tribute To Dick Clark On Dogwood Lane

An impromptu tribute to Dick Clark stands at the corner of Dogwood Lane and Plush Mill Road near his former Wallingford home. Clark past away last week at the age of 82, and is best known as the host of the television show American Bandstand.

Dick Clark resided at 308 Dogwood Lane in Wallingford during the early 1960’s while acting as host for the popular TV show. He moved to California in 1964 when the show was moved to the West Coast.

In a 1959 newspaper article of the time the purchase of the home on Dogwood Lane is reported:

Clark made a substantial down payment on a home under construction scheduled for completion in July or August. The 2 story, multi-level homes are in the $36,000 class, and have 5 bedrooms.

In January 1961 the Delaware County Times reported that Clark made a surprise visit to the Junior Assembly dance for 7th and 8th graders at the Summit School, which is located across the street from the Clark house. He watched the latest dance craze, The Pony, and stayed to sign autographs.

Wallingford remembers America’s oldest teenager, and former Wallingford resident, Dick Clark.

Dogwood Lane

Wallingford Real Estate – Wallingford, PA 19086

Time Is Not Short On Short Sales

April 23, 2012 by admin

Short Sales held promise as one of the solutions to the nation’s foreclosure mess, but with recent data relaeased by RealtyTrac, a CA based firm that tracks data on distressed homes nationwide, the timeline to complete a short sale has risen dramatically.

The average time from start to finish with a short sales nows stands at an average of 306 days, compared to 113 days in 2006. By comparison foreclosures sales take a average of 186 days to complete, only slightly higher than the 178 days recorded in 2006.

In a short sale, the bank or mortgage lender agrees to discount a loan balance because of an economic or financial hardship on the part of the borrower. The home owner sells the property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender.

Short sales play a big role in the market today. Nationally in the 1st quarter there were approximately 105,000 short sales, and it is estimated that as many as 5 million borrowers are either delinquent or in some stage of the foreclosure process.

Home buyers often express interest in distressed properties, but need to be aware that if time is of the essence in buying a property, a short sale may not be the best alternative.

Wallingford Real Estate – Wallingford, PA 19086

Archives for April 2012

S. Clark Kendus