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Multiple Offer Strategies In Real Estate: Help For Home Buyers

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It is no surprise that we are seeing more and more multiple contract situations.  The perfect storm is in place – interest rates are at 65 year lows, inventory levels are at extremely low levels, and there are buyers anxious to get into houses.  Affordability levels are near all-time highs as well so it only makes sense that buyers are finding themselves competing to get into a home today.

So, the question is how do you win and get the home your client’s desire?

  • Add an escalation clause which allows you to bid up the price above any other offer up to an amount you are comfortable paying.  The escalation amount should be an interesting number like $1,150 as most people just do $500 or $1,000 – make your offer stand out.
  • Increase your earnest money deposit to show your interest in purchasing the house.  If your down payment is 20%, make your deposit 10%.  If you are doing FHA, have your deposit equal your down payment of 3.5%.  You are going to be putting the money down anyway, why not do this and attract more attention to your offer?Multiple Contract Strategies
  • Have a very short time frame on your home inspection contingency and radon contingency if you choose to have them.  Also, consider doing the inspection contingencies for informational purposes only just leaving yourself the opportunity to void if you find something so egregious or beyond what you expected.  If you and your agent are confident in the home’s condition, you may want to consider eliminating these contingencies but be extremely cautious when not exercising these contingencies.
  • Have a quick settlement date – Ashley Smith with Atlantic Coast Mortgage can close a loan in just 8 days if she has a complete loan application from her clients.
  • Additionally, encourage your loan officer to be proactive and call the listing agent and explain the financial arrangements and status of the loan.  Pat Cunningham of Home Savings and Trust was one of the first lenders to mention he was doing this for his clients.
  • Allow the seller to rent back after closing giving them flexibility on when they need to move or to give them time to find a home.
  • Put in a home of choice contingency for the sellers if they have not found a home yet – make the contingency for an extended period of time so they have the opportunity to find the house they really want.
  • If you are so bold, you can have the clients waive the appraisal contingency.  In order to do this, you need to work in conjunction with your lender and see if they can get a quick turnaround on the appraisal.  If so, have the appraisal done in concert with the home inspection contingency and if it doesn’t appraise, you can void based upon the home inspection or on the HOA/condo documents.  Not one of my favorite suggestions but it is a strategy you can undertake to help your contract win.  Also, if your lender can get a quick turnaround, make the appraisal contingency 5 or 7 days.
  • If you are dealing with a home owner and not a bank or investor, have your clients write a letter along with photos explaining why the house is so important to them and the trials and tribulations of their home buying experience.  It can sometimes help to pull on the heart strings of the owners.
  • You can explain to the listing agent, the highest contract isn’t always the best contract.  You need to have the right people in place to consummate the transaction not just someone willing to throw a high number just to get the house to only experience remorse later and back out of the contract.

These tips will help you win more contracts.  Consult with the clients and make sure they are comfortable with your recommendations prior to implementing them so they fully understand the repercussions of their actions.  Get it?  Got it?  Good!

Now, go sell something!

Aside

Magic Tricks Inspire Leadership and Growth In Northern Virginia and DC Metro Real Estate

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In our Vistage meeting this week we had a very dynamic speaker by the name of Andrew Bennett. Andrew has a very interesting background and actually uses magic in his presentations to aid in engaging his audience.  He spoke about analyzing your business through the skills magicians use: appear, disappear, and restore.  Using slight-of-hand, Andrew evokes concepts: what in your company do you need to take on as a new initiative to grow your business,  what do you need to eliminate from your business that is unproductive or preventing growth, and what needs to be fixed – worth keeping, but hasn’t been tweaked to operate at full capacity.

The Magic of Andrew Bennett Blending knowledge of leadership, organizational culture, and mental management with magic.

Key areas we discussed were culture and employee engagement.  It all starts at the top and filters down to employees.  Look at how you use your words, how you inspire, develop relationships, develop your self-awareness, display your authenticity and utilize discipline; apply the appear/disappear/restore analysis to your business. Let’s look at each of these areas individually.

  • WORDS – Researchers say you have 60,000 thoughts a day – 57,000 were thoughts you had the day before.  What do you ask yourself so as to drive yourself to be successful?  Be intentional in your thoughts and in the questions you ask yourself.  To change your thoughts, change your words.  Think in terms of, “what I speak is what I create”.  Think about what you say to others and more importantly, to yourself.
  • INSPIRATION – the definition is “to breathe life into”.  Inspiration comes from the inside, so touch what matters to others – help them believe the impossible is possible.  As a leader, deliver the power of WOW.  Passion and hope come together and become inspiration.  Build on emotions and sense of accomplishment.  Think about what inspires you about your business?  What are you willing to suffer to get what you want? Why is that important to you and why does that matter to others.
  • RELATIONSHIPS – Your individual supervisors and the amount of communication they have with your people are critical to employee engagement – know personal things about your people to build trust – recognize other’s mannerisms to determine how can you help them.
  • SELF AWARENESS –  What we believe is what we see.  What do you see?  Who fosters these beliefs to encourage you to greatness?  How do my beliefs result in how I show up each day?  Pay attention to this area – how you show up is critical to the culture you are developing.
  • AUTHENTICITY – Transparency and vulnerability are your keys to authenticity.  Ground yourself in reality but be hopeful.  What are your challenges or struggles and how will you overcome them?  Be true to yourself and you will be authentic to others.
  • DISCIPLINE – do what I say, it is that easy!

Things to consider as you contemplate these topics:

  • What excites you about our organization?  Communicate this with others.
  • Who are your trusted allies?  Seek them out and ask for feedback.
  • Where are your blindspots?  We all have them and your trusted allies can help guide you through discovering them.
  • Deliver your message consistently but paint the picture in different ways to appeal to your team members.

As you move in this direction be passionate about what you do, help make a difference in other’s lives and build something greater than yourself through inspiring others to achieve more.  Get it?  Got it?  Good.

Now, go build something!

Sequestration: FHA Delays, Department of Agriculture, USDA Loan Processing and How It Will Affect The Real Estate Market in Northern Virginia

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Sequestration is here and it is going to affect a lot of areas of our life – some people more so than others.  The initial $85 billion cuts will include furloughs for 2.1 million federal workers for five months.  They will be required to take 22 unpaid days beginning in April and will end in September.  This 20% reduction in pay to many people has the potential to put them behind in their mortgages resulting in an increase in default notices.  This in turn could result in more short sales and foreclosures thereby affecting prices and more importantly the housing recovery.  Additionally, if people are making less money, they do not have the ability to “move up” so we will continue to see a lack of inventory in housing.  Worse yet, in some cases if people with security clearances fall behind with other bills, they could lose those clearances and their jobs.Image

Speaking of housing, FHA has acknowledged they will see delays in endorsements/claims time frames which will impact settlement dates because of getting loans not being completed in time for closing.  FHA is responsible for approximately 25% of loans so this is a big deal and you should pay attention to your closing dates.  Along these same lines, cuts in the Department of Agriculture will mean there will be delays in the processing of USDA loans.  These loans typically take a minimum of 75 days – I would encourage you to look at a minimum of 90 days to be safe.

In addition, people who rely on Federal Housing Assistance are going to lose their benefits which would leave them homeless.  These people include veterans and the disabled.  One other area that is affected is foreclosure prevention aid to nearly 75,000 people – keep an eye on this development.  People who receive Housing Choice Vouchers will be cut.  These vouchers are used for renting apartments.  Approximately 125,000 will be affected here potentially leaving them homeless.

A majority of the cuts will come from defense spending.  It is estimated that nearly 207,000 Virginians will lose their jobs with 75% of those residing in Northern Virginia.  California will also lose a total of over 200,000 jobs with Maryland not far behind with over 100,000 jobs lost.  In totality, it has been predicted 2.14 million people would become unemployed as a result of sequestration.  There will be unintended consequences resulting from these cuts which will total $1.2 trillion by 2021.  One area that comes to mind is travel by air.  Fewer air traffic controllers and fewer TSA employees will result in delays at the airports for sure.  Another area is Hurricane Sandy victims, their aid will be diminished as well.  Lastly, when the hardworking, lower middle class government workers get 20% of their income slashed, there will be less discretionary spending which could have broad sweeping consequences – let’s see what else will be impacted.

Platinum Group: Hot Topics in the Northern Virginia Real Estate Market

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In a recent Platinum Group meeting we discussed many hot topics in the real estate market today.  They included the appraisal issues we are encountering that I discussed in my last blog, new home sales, the rental market and of course, low supply and high demand.

New home prices are rocketing up, incentives are going away, one builder sold 13 houses last weekend in Prince William County and took closing costs down to just $5,000 when they were offering more at the beginning of the weekend.  Nationally, new home sales dropped but not in Northern Virginia.

Platinum Group Hot Topics FEB 2013 scottymacsblog

Lack of resale inventory is leading buyers to new homes.  When buyers go to new homes, their prices increase.  Be careful as a lot of builders don’t have appraisal contingencies in their contracts.  Ask what happens if house doesn’t appraise.

The rental market continues to be on fire.  We have a 1.7 month supply of rentals available in Northern Virginia.  Prices have stabilized and move quickly when they are in good shape.  Additionally, in a recent article, it was estimated there will be another 6.6 million renters in the market.  It makes now a good time to work with investors, understand the rental process or even start a property management company.

One other topic we discussed was the lack of inventory of resale properties on the market.  It has been mentioned that we are at an 11 year low in terms of available properties.  When something is desirable, we have seen as many as 14 contracts on one home.  It is time to structure offers for our buyers so they can win in multiple contract situations.

 

To learn more about the market or our networking group, feel free to reach out to me.  scottmacdonald@remax.net

Now, go sell something!

Success as Appraisal Concerns Rise In Northern Virginia Real Estate

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Uh – oh some appraisals are low!
As we enter the spring market I have growing concerns over appraisals here in Northern Virginia. As we come out of the “slower” winter months, appraisers have fewer homes to choose from to help catch them up with the market today. We are seeing 20-30 people regularly at open houses which is rare for this time of year. There are only 3,081 houses for sale in all of Northern Virginia – a true supply issue for the number of buyers in the marketplace. As a result, it is rare not to see multiple offers on houses listed today. This is not an artificial “run up” of housing prices and we are not stretching prices as we are still below the highs of the housing bubble in many areas. The law of supply and demand should dictate property values in my opinion.
Here are examples of the last few appraisals we have come across. Two single family homes in the same neighborhood in Fairfax both recently came in low – one was sold at $850,000 and appraised for $847,000 – really? The other one sold at $877,000 and appraised for $811,000. How can these numbers be so far off from each other and where is the real estateAppraisal Concerns scottymacsblog market headed today? One of our agents listed a town house in Countryside for $320,000. They received 3 contracts in the first weekend – an obvious issue of supply and demand. Well, it sold for $326,500 and appraised for $300,000. The appraiser used a short sale that had closed several months prior to this sale at $260,000 as a comparable. Short sales are less than 8% of the market plus if it closed several months prior to this sale, because of the short sale process, the contract was written several months prior to closing – how is this truly a reflection of the market today? We also had an offer come in on a town house in Centreville recently which sold for $450,000 and appraised at $435,000. The appraiser used a new town house in a community down the street that settled in July of 2012. Again, as it was new build, the contract was written a few, if not several months prior to the settlement – is this a true indication of market value today? What’s worse is there was a closing in the same neighborhood which was a higher value that settled in December that was not used to support the price of our town house. Lastly, we had a condo in Sterling that came in low by $8,000. The sales price was $175,000 and it appraised for $167,000. I think you can understand our issue.
What can be done? First, provide information to your sellers and buyers early. Set the expectation that the property may not appraise for the sales price and discuss the potential options with them so they understand what the next steps would be for them. Let them know that the appraisers may have difficulty finding suitable comparable sales – this is where you must be diligent and provide solid comparable sales to the appraiser. If you are dealing with an FHA appraisal and the sellers of comparable properties paid closing costs for their buyers, let them know the appraiser will take that amount off the top of the sales price which could bring down your value. As there are many multiple offer situations, some buyer’s agents are putting in high offers to get an approved contract knowing they won’t get the needed appraised amount – let your sellers know this is the case and the highest price is not always the best offer. If you are selling a new home, most builder contracts do not have appraisal contingencies in them for their protection, not the buyers. As prices of new homes are escalating this becomes a concern for buyers today. Remind them that an appraisal is a snap shot in time based upon historical data that is already behind our escalating market.
In addition to providing information to your sellers and buyers, provide extensive details to the appraiser. Plus, don’t just provide them with information, meet them and discuss what you and they are seeing in the market – build rapport by sharing your stories and listening to theirs. Share with them your comparable sales and why they should be considered. Explain the Home Pricing Wizard to them in detail and how it helped you determine the market value. Provide them with copies of the competing offers so they can see it is a desirable property. Share with them your feedback from Showing Suite that shows other agents that visited the property how they felt the property was priced at market value – or below. Bring market data from RBIntel that shows the market is increasing in value, as well as, articles that point to this fact. You must be diligent in your representation of our clients and do all you can to get the houses to appraise.
The good news is not all properties are appraising low, but there are enough that are, so this is why you need to pay attention and educate our clients on what is happening in the market. This separates you from other agents and makes you a professional. Get it? Got it? Good!
Now, go sell something!

Scott’s Market Minute for Northern Virginia: Low Housing Inventory For A Hot Real Estate Market

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Spring market has sprung early this year. Thinking of selling your home? Watch Scott’s Market Minute every week. Scott provides real estate market information for Northern Virginia and his Market Minute offers a quick look into current market conditions, housing inventory levels, distressed property statistics, and market projections. If you want to know what’s going on in the Virginia side of the DC Metro housing market area, contact Scott MacDonald (703)652-5777 or follow his blog http://www.scottymacsblog.com

Scott’s Real Estate Market Update for Northern Virginia

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Scott MacDonald’s Market Minute Update offers a quick look into the current real estate market conditions for Northern Virginia, the here and now of what is going on in the Virginia side of the DC Metro housing market area. The real estate market is favoring Sellers as Buyers in need of homes have fewer to choose from; multiple offers have been recently noted on homes listed and priced at competitive market value. If you are looking to buy or sell, give Scott MacDonald a call 703-652-5777

Agent Success: Professional Courtesy

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As the Spring market begins and Real Estate Agents are showing and listing more properties, Scott MacDonald offers a few tips and reminders when showing properties. Want to learn more about the REMAX Gateway?  or contact Scott MacDonald directly at (703) 652-5777 scottymacsblog.com

REMAX Gateway Agents Training for Anticipated New Home Sales

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This year the real estate market trend will shift to incorporate more new home construction sales as we are seeing fewer resale properties on the market. Inventory levels of resale existing homes were down as much as 30% throughout 2012 in NOVA. So we brought in the new home sales expert Suzanne Neff to educate our agents on how to be more successful in selling new homes and how to add more value as an agent in the new home sales process.
We also heard from Leslie Strittmatter with New Homes Guide . They provide a list of all new homes in an easy to use directory. If you don’t see a builder you know, just let Leslie know as this is a free service to the builder.
Suzanne offered us some very practical and insightful information that I would like to share with you:home under construction

  • Be wary of registration policies – every builder is different, time of registration & period, must be present upon registration.
  • Remember: 1st agent in – is their agent
  • Preview the new home – just like a resale
  • Ask to see entire agreement in advance of writing contract and review with the client prior to writing the contract.
  • Prior to writing contract talk with sales person about the negotiating position of the builder. It is important to know all the facts.
  • Ask about communication process of sales person – how often, with whom, etc.

Did you know … There are differences in builder’s contracts – builders add paragraphs when something happens in the past, deposits (flat fee, %, at contract writing, at selection time), no appraisal contingencies allowed, sometimes deposit on contingent contracts it is not refundable, days to make color selection – loan application, loan approval, etc., notice to close 2 days to 2 weeks.
Did you know … Some builders have in house mortgage/title with credit back for closing/options/etc. (have client get GFE to compare to your lender to see if builder will match) – do a chart to show what the breakeven time-frame would be for them to “not” use the builder contract. Often times, it is more difficult for the outside lender to work with the title company and vice versa. Builder likes control.
Did you know … Keep client in property 2 weeks past closing because it is your responsibility to keep a roof over their head – not the builders. Permit process may delay closing, weather may delay closing. Never schedule back to back moves.
Did you know … Get a copy of the contract at contract writing or you may not get one for over 30 days.
Did you know … Many contracts say- products/offerings are subject to change without notice and builder has the ability to switch out products of similar quality – make your buyers aware of this clause so there are no surprises. Shortages may occur as factories are not ready for increase in sales. Prices – hello, the market is hot and manufacturers may raise their prices and builder may switch manufacturers.
Did you know … You need to ask how many inspections are there and which ones can we, as agents, attend and which ones can the buyer attend.
Did you know ... Most builders will want the home inspector there before or after scheduled walk through. Some will want you to use their approve inspectors.
Did you know… Most builders want to build a product they are proud of and will stand behind their product. Most every builder will have a form that “waives their right to warranties” because they, the builder, will offer a better warranty than what is required by Virginia and often times, the vendors they use give longer warranties than what the state requires.

Have you ever considered “why do people like being new home sales agent?” This is good to think about just so you know the basic type of personality you may be potentially working with throughout the sales process:

They like to sell; they also strongly desire and rely on support of administration staff; they typically like to know where they are going everyday; a salary and/or draw is often part of their compensation; they typically participate in health care benefits that the builder potentially offers; sales commission structures differ between builders but obviously, the more they sell, the more they earn; two days off with 40+ hours a week – days off vary during the week (so be sure to call and find out their schedule because not all assistants know the neighborhood, offerings, etc.); and new home sale persons must be ready to sell at any time because you/your client may be the only person they see all week – this is another reason why it is so important to call ahead, so you can get the data and let them sell their product when you bring your client in.

Suzanne strongly suggests taking the time to call before taking your client in to the sales office. This introductory conversation shows your level of professionalism to the new home sales person, and even more importantly, the information you provide to your client shows them that you are doing exactly what you promised: helping them find a home and representing them in their purchase of their new home.

Here are some great questions to ask the sales person:

  • What is the Registration policy?
  • How much will Agent be paid?
  • What is the commission percentage based on?
  • What are their hours?
  • When is the sales person available?
  • What is available?
  • What is price range?
  • What is average sales price?
  • What is building time frame/delivery time?
  • Are there any buyer incentives being offered by the builder?
  • Do you know of any price increases in the near future?
  • Convey something about your clients and background of their move.

Kevin Harris is an award-winning residential architect, international speaker, champion of culture-based design, an LSU and Harvard GSD graduate, father of 3, Eagle Scout, blue water sailor and Fellow of the AIA. For more information on Kevin or the firm go to http://www.kevinharrisarchitect.com.

Remember this is an emotional time, so be sure to be there for your clients.

As market continues to move in the builder’s favor, negotiations on pricing and incentives for mortgages using mortgage and title partners will be less, credits for upgrades go away, and in some cases, deposits will become non-refundable. Be sure to be a professional Realtor and know more so you can earn the trust and respect of your clients and the new home sales professionals. Get it? Got it? Good!
Now, go sell something!

Success in the Real Estate Business

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Scott MacDonald the Broker, Owner and President of REMAX Gateway speaks on the importance of successful business model and practices for real estate agents. With over 25 years experience in the real estate market world, Scott offers his insight to agents. REMAX Gateway serves the Northern Virginia, Maryland, and DC Metro areas with locations in Chantilly, Brambleton (Ashburn), Lorton, and Gainesville. A 5th office location in Arlington, Virginia is scheduled for Spring of 2013. Contact Scott MacDonald (703) 652-5777 or follow along at scottymacsblog.com