Top Three Buyer Mistakes In A Hot Real Estate Market

Budding trees, singing birds and swarms of home buyers. These are the signs that spring is just around the corner.  The first two happen every year but this year especially home buyers are our early and in droves. As we learned from the ‘birds and the bees’, ying and yang and Marvel Comic Books, it takes opposing forces to create balance.  Right now the balance of the Boulder real estate market is off kilter. There are not enough homes on the market to satisfy the demand of the buyers.

Over the past week 171 properties have come on the market in Boulder County. Already 24% of those homes have gone under contract.  If you look back two weeks that number jumps to 32%. It is a fast moving market. We just listed a home in Louisville and over the three days on the market there have been 18 showings.  Multiple offers are very common and many buyers are getting caught up in the frenzy.  Here are the top three mistakes I see being made in this market.

Paying Too Much

When you are at the supermarket comparing products and prices is easy. For example, you want some soup so you compare the choices available and decide; what flavor, what brand, what size, etc. It is easy to decide because there are ample choices and whether you are a value shopper looking for a generic brand or are willing to pay for organic soup with a brand name, you can easily make that choice. But if you go to a remote store, like you often find near a campground with one soup choice the decision is whether paying $5 for a can of Campbells is worth it to you. The scarcity in choice allows the seller to raise price and at that price soup will be worth it for some and not worth it for others.

Pardon the extended metaphor, but right now there is a scarcity in the real estate market and buyers are faced with buying decisions with limited options.  In many cases the decision is, do I pay more than seems reasonable or do I wait and hope that something better comes on the market.  I have seen many sellers pushing the market and some are being rewarded by buyers willing to pay high prices.

So, if you are a buyer how do you balance being competitive in this market where 18 buyers are looking at the same property within a few days and making a smart decision. The first tip is to do research like an appraiser would do. Look at the sales in the neighborhood over the past six months or year (depending upon how many have sold) and find the homes that are most like the home you are looking at. Compare the upgrades, price per square foot and I like to compare the assessed values as set by the county appraiser.  After comparing the sold homes to the home you are interested in you should have a good idea if you are within a reasonable range or if you are going to be setting a new record for the neighborhood.  If you are getting a loan, the appraiser hired by the bank will be doing the same analysis and they are much more conservative than the normal buyer who is newly in love and is riding an adrenaline high from beating all of those other buyers. If you have paid too much the appraisal will stop the sale.  So save yourself some time and money and work with your Realtor to see if what you are paying is reasonable.

Getting Caught Up In A Scarcity Mentality

When houses are flying off of the market and you may have missed out on a home or two, it may be easy to start to think that the house you have just seen (and might just work) will be the only one and if we don’t make an offer now…  Home buying is a process and sometimes there is a delicate balance between patience and action. This is where advice from a good buyers agent is invaluable. The truth is, even though you think that there will never be another house like the one you just lost out on, new listings are coming on the market all the time. A home buyer must always look forward and never dwell on houses that “might have been”. The right state of mind is one that objectively looks at the options and sees each house that doesn’t work as one step closer to the one that will work.

Not Acting Quickly Enough

In a sellers market the competition for good houses is fierce. Being a part-time buyer is frustrating and futile in many ways. In order to be successful you must be ready to pounce on a good home. Here are the steps that a buyer must take to be a active buyer, ready to buy.

• Financing Ready – You must have your ducks in a row. A lender letter is required with all offers and it is best that you are already in the process of loan approval, just waiting for the property, verification of your information and an appraisal.  You also must have liquid funds for earnest money ready to go.
• Quick Information – Knowing about the homes on the market is the next hurdle. If you are waiting for the Sunday paper you are most likely missing most of the homes. What I do for my clients is to set them up with a search that automatically scourers the MLS for new listings every few hours and sends us both an email with the results.
• Quick Showings – Once you know about the new listings you need to get out there are see them quickly. Flexibility is a key and seeing promising new listings on the first day gives you an advantage.  I showed a listing this week that had just come on the market at 10 am.  We met at 5 pm and there were four other groups meeting there at the same time. What a zoo!
• Quick Offer – Being ready to make an offer quickly is another key.  Be ready to analyze the data (see above) and make a strong offer is key to getting an offer accepted. A few weeks back I was able to make an offer on the spot at the house by writing the contract on my IPad and having the buyers sign on the spot. The seller and listing agent were about to meet so we had a tight deadline and we were able to meet it.
• Be Smart- As coach John Wooden said “Be quick, but don’t hurry.” Buying real estate is a long term decision with large consequences if you don’t get it right. Be ready to make your best offer but don’t get caught up in the wave of competition.

My Services – Automatic Listing Search and Personalized Home Search Website

It’s easy to find homes on the internet.  Search sites are everywhere but I know it is frustrating when the information is outdated. It also is a big job to sort through all of the homes each time to find the new listings or the price reductions. I can help! I can set up an automated search that sends new listings automatically to your email. This way you know what is happening in the market but don’t have to sort through all of the homes you have already seen or don’t care to view.

The best part is the website that goes along with the service. Each of my clients can have a personalized, password protected site in which to view all of the information available on a given home. On your MySite, you can view, sort or delete listings so that you can easily come back and view or share what you have seen. The site updates automatically so when a house goes under contract or has a price change you will know about it when you log in.

This is a great service and I would like to set it up for you. Take a look at the video above for a quick demo on how it works and how it looks.  You will love it!

Just call me at 303.818.4055 or email me

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Anatomy of a Real Estate Listing Shortage

Being a home buyer is Boulder County is challenging right now. All of the indicators say that this is a great time to buy a home, but home hunters are finding that one key component to their plan is missing. That missing element is the perfect home.

Banks are giving away money, the economy is looking up, Colorado is gaining population, finding a suitable rental property is hard to do and expensive and prices are very similar to what they were five years ago.  People who are paying attention recognize an opportunity that may not come again for a long time. But right now in a county of nearly 300,000 people, there are 1,519 properties available for purchase.  I hate to be the bearer of bad news but not all 1,519 homes are dream homes. In fact, typically a very small number of homes are available for any combination of area / home type / price range.

To illustrate the situation let’s compare the number of active listings (without a contract) now versus the same time five years ago. Right now there are 1,091 single family homes on the market in Boulder County that are ready for purchase.  At the end of October in 2007 there were 1,919. That is a 43% drop! No wonder there feels like a lack of listings to view.  Here is a graph showing single family home inventory at the end of each month over the past five years.

An equation that makes sense to explain the number of houses on the market at any given time is:   unsold active homes + new listings – sales – withdrawn listings = current inventory

I have already shown the answer but let’s break it down a bit more and look into the components that make up inventory.

New Listings

The life blood of a healthy real estate market is new listings. The hope is that a good percentage of those homes are salable; that is well priced, in good condition and in a reasonable location.  I have been tracking weekly data over the past three years and one of the measures I look at is new listings.  Over the first 43 weeks of this year 6,122 new listings have come on the market. This is 4% less than 2011 and 17% fewer than two years ago.  Clearly not all potential sellers have gotten the message that the market has turned. Here’s how this looks graphically.

Sold Listings

The main component to our listing shortage right now is the increase in market activity as it is shown by sales and the number of homes that are under contract. Sales for the year are up approximately 25%. This is a welcome gain to a market that had been falling in terms of number of transactions for a number of years. Activity has been strong even into the fall and the competition between buyers has made finding the right home even more difficult. In a normal, healthy market, the number of homes that are under contract compared to the available homes falls in the 15 – 20% range. This year we have spent most of the year with a 40% under contract percentage. This means that at any one time only 60% of the active listings are actually available. When you subtract the overpriced and outdated homes that are listed the inventory that a buyer would actually be interested in shrinks significantly.

This year through the end of October 4,166 homes have gone under contract in Boulder County that is a 23% increase over last year. Here are two graphs that show the increases in the sale side of the equation.

If you are a buyer, I hope this gives you an in depth understanding on why it’s hard to find a home right now. If you are a seller, I hope it gives you the information you need to give you the courage to list your home. Either way, it is a market where you need help to make sure you are getting good information in a timely fashion. If you need a good Realtor who understands the market and works in it every day call me I’m ready to be of assistance.

How To Handle Multiple Offers On A Home

Even though we are in a slower time of year, houses are still selling.  All year I have been seeing a shortage of good listings in the market.  Right now there are 15% fewer available homes on the market than last year at this same time.  This means that if a serious buyer is out looking for a nice home the cupboards are fairly empty.  Right now there are many leftover homes on the market.  I define leftover homes as those listings that haven’t sold for a specific reason whether it be price, location or condition.  This shortage leads to heavy activity on those homes that come on the market ready to sell.  Those homes are well priced, in good condition and in a location that doesn’t raise a red flag.  This leads to multiple buyers being interested in the same house at the same time. Here is some advice for handling multiple offers from the buyer and seller perspective.

From The Buyers Perspective:

• Check to see if you have competition. Your agent will call the listing agent to announce your intention to write an offer. Make sure you know if you are competing with another buyer. At the same time have the agent ask for the sellers preferred closing date and for any items that will be excluded from the offer. All of the information below assumes that there is another offer.
• Make your decisions quickly. Getting your offer in a day ahead may make a big difference. Ask for a quick acceptance deadline.
• Do your homework: Check comparable sales and decide the maximum price you will be willing to pay. Also, think about how you would feel if you would lose this house over a couple of thousand of dollars.
• Do a thorough walk-through: When you see a house you are interested in, take your time. Check on the condition of the house, what would you need to do to make it yours. Are the systems (furnace, roof, windows) in good condition?
• Prepare a clean offer: Don’t ask for Sellers to pay for appraisal, cleaning, HOA transfer fees etc. When the seller is considering two similar offers, $50 can make a big difference and send a signal that the buyers asking for all of the small stuff will be tougher to work with down the road on inspections etc.
• Have your financing in place and make sure to include a letter from a lender along with the offer. I prefer to see a local lender who can jump in and make the closing work in a difficult situation rather than somebody who is working a toll free line.
• A nice touch is to write a personal letter to the seller explaining who you are and why you love their house. The seller has an emotional attachment to the house and wants to sell to someone who will take care of their house.

Consider an escalation clause. When the house is a good value and you know there is competition one effective method is to write in an escalation clause. This clause in the contract automatically raises the bid price if another offer beats theirs financially. For instance it could read “the offer price shall be automatically raised to a price $1,000 above any other bonefide offer, the purchase price shall not exceed $xxx,xxx”. This is where the buyer has to know how much they are willing to pay; is it full price or $5,000 over?

From The Sellers Perspective:

• If you are attracting more than one offer it shows that you have taken care of your home and priced it correctly.
• You want to make sure that all interested parties have a chance to submit an offer. Have your agent communicate to each agent who has shown the property recently to gauge interest.
• When reviewing offers look at these main points: net price to you after all closing costs, dates and terms and buyers ability to pay and close.
• Try to read between the lines and get a feel for motivation. A buyer who has been transferred and is living in temporary housing is a stronger candidate than an investor who will not be living in the house.
• Try to tie up some of the loose ends now. Use a counterproposal to change dates and terms. You will never again be in a better negotiating position.
• Choose what feels right and be open with your agent .
• Remember, you have a right to choose what offer you accept but you do not have the right to discriminate against a buyer. Choose an offer based upon what is presented in the contract.

From The Agents Perspective:

• I make sure the communication lines are open. I get a dialog going with the other agents. If all parties feel informed about the process and situation there will be no hard feelings. If a second offer comes in after the first, it is customary to call the first agent and give them a chance to change their offer.
• If you are in an agency position with your client they will lean heavily on an agents advice. Give them good information and let them choose from the possibilities.
• Every situation is different but remember the buyers agent is charged with helping the buyer get the house and the sellers agent or listing agent is charged with getting the best price and terms for their client.

Of course every situation is different so these tips are just guidelines.  The most important thing is to have a good agent walking you through the process.  Personally, as a listing agent I am there to get the best price and terms for the seller but I try to keep everyone equally informed throughout the process and let the offers themselves lead the sellers decision.  In the end I know I did a good job if the seller is happy and everyone else is satisfied that it was a square deal handled ethically.