Making An Offer

Congratulations!  You've found your dream home - but the process doesn't stop here!  The next thing you need to do is to write a strong offer to be able to get that dream home!

Depending on the type of real estate market you are in, you and your Buyer Agent will want to discuss what is the best strategy for making an offer!

REAL ESTATE MARKETS!

In 2008, the real estate market experienced a downturn characterized by an abundance of houses for sale but a scarcity of buyers. In the Richmond area, statistics from September of that year revealed that only 1,054 homes were sold, with an average time on the market of 74 days. Sellers were able to fetch approximately 95% of their asking prices and contributed an average of $4,600 towards buyers' closing costs.

Fast forward to September 2012, and the market remained sluggish, with just 1,118 homes sold in Richmond within an average of 82 days on the market. Sellers were receiving around 93% of their asking prices and were paying an average of $2,804 towards buyers' closing costs.

However, the market scenario changed significantly by September 2023. With 1,587 homes sold in the Richmond area, properties spent an average of only 25 days on the market. Sellers were now able to secure almost 102% of their asking prices while paying an average of $2,400 for buyers' closing costs.

This highlights a shift from the buyer-driven market of 2008, where sellers were more willing to negotiate on price and contribute towards closing costs, to a more seller-oriented market in 2023, where sellers were able to command higher prices and fulfill fewer closing cost obligations.

So ---

Sellers Market = a market where there are a lot of buyers but few houses to choose from = sellers are in the drivers seat!

Buyers Market = a market where there are a lot of houses for sale but few buyers to buy them = buyers are in the drivers seat!

WHAT PRICE SHOULD I OFFER?

This is a question that every buyer wants to know!  How much to offer on a house really depends on the type of market you are in (buyers or sellers); how long the house has been on the market (1 day or 30 days or more); and many more factors!  You will want to know how this home compares to others in the neighborhood, the area, the school district, etc.  What your Buyer Agent should be telling you is what the state of the market is right now - not just in the Richmond area, but also in the neighborhood that the house is located in as well as the immediate area where the house is at.  All real estate is local and some areas are seeing continued strong sales while others, although still very tight, are seeing a bit of a cooling down of the real estate market.  Knowing what is happening in the particular area you are considering is key to knowing how much you should offer!  Your Buyer Agent should be able to pull up homes that are active, pending, sold and expired in your area so that you know just what is happening.

• Active Listings tell you what the competition is to the home you are considering!
• Pending Listings tell you what homes have most recently gone under contract.  Although they are not yet closed and you don't know what they will ultimately sell for, it can tell you how quickly it went under contract.  It can also let you know how the home you are considering compares to that home that went under contract!
• Sold Listings tell you what has sold in that area in the last 6 months!  In a strong sellers market it is backward looking but it does give you a good idea of what is selling and how quickly the homes are selling and what they sold for, as well as any concessions the seller made and the type of loan the buyer got!
• Expired Listings will tell you what homes the market of buyers rejected!  Although most homes in a strong sellers market tend to sell, not all do and so this is good information to take into consideration when you are trying to decide on the price you want to offer to the seller!

MAKING AN OFFER IN A SELLERS MARKET!

If you are making an offer in a sellers market (similar to what we have been seeing in 2023), then there are some guidelines you should follow:

1. Make the offer as clean as possible!  Put in as few contingencies as possible.  Avoid asking for personal property.  Offer a quick closing.  Allow the seller to leave anything in the house they don't want to move with them.  Waive the appraisal and home inspection - but if you can't waive these completely, limit the repairs you will request and offer to make up all or a portion of any appraisal gap.  A home sale contingency should be avoided if possible!
2. Make sure your loan is in order!  Before going out, make sure you have an underwriting approval letter from your lender (not just a standard pre-approval letter).  Have the lender call the listing agent to let them know you are a strong home buyer!
3. Other Sweeteners to consider adding to your offer!  In addition to the above, some buyers have offered to pay some or all of the seller's closing costs!  Some buyers are allowing the seller to retain possession at no charge for a period of time after closing!  A strong earnest money deposit and a strong down payment could make your offer stronger!  Many buyers will offer asking price AND attach an escalation clause amending their offer in the event of multiple offers!  There are many creative strategies that have been developed in the 2023 real estate market, so talk to your Buyer Agent to see if there are any others you could add to your offer!

MAKING AN OFFER IN A BUYERS MARKET!

If you are making an offer in a buyers market (similar to what we had in the downturn of 2008), then you, the buyer, are really in the drivers seat!

1. Contingent offers may be more acceptable to the seller!  Although it is always wise to limit the number of contingencies in your offer, a seller may be more open to home sale contingencies as well as appraisal and inspection contingencies and the seller may be more open to negotiating repair addenda!
2. Make sure your loan is in order!  Whether you are in a buyer or seller market, it is always recommended that you have a strong preapproval, preferably an underwriting approval!  This is especially a good idea if you are coming in with a less than asking price or even a low ball offer (about 25% under the asking price) since it gives the seller a great sense of assurance that you are a strong buyer!
3. You may not need to add sweeteners to your offer!  In a market where there are lots of houses for sale, the seller knows that they are competing with many other sellers for the few buyers that are out in the market.  Therefore, as long as you are a strongly preapproved home buyer with a clean offer, you may not need to add sweeteners to your offer to entice the seller to accept your offer!

As you can see, there are different strategies for different markets.  You and your Buyer Agent will be able to discuss the type of real estate market you are in and discuss how to structure your offer, no matter the market, to put you in the best position to have your offer accepted!

And if you have questions and would like to chat, feel free to send me a message.  We can grab coffee and sit down to discuss the home buying journey!