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.
