Low Housing Inventory Means Buyers Must Be Smart When Making Offers

In areas all over the country, the supply of available homes for sale is down… way down in many areas. It’s down about 50% here in parts of California. That means fewer homes for buyers to buy, and fewer buyers to actually get their offers accepted.

It’s like 2002 – 2005 all over again, which means very few homes on the market and LOTS of buyers. That means multiple offers are received on most homes, even the fixers. The net result is that many buyers are frustrated with the market because, of course, only ONE buyer “wins” on each house.

It’s interesting, though, because even though Realtors counsel their buyers about this market (low inventory and multiple offers on each property), buyers often “don’t get it” and still want to write low-ball offers. The market is changing, again, and that means buyers have to be “smart”, along with their agents, and write good offers that will get accepted. So, what does that all mean? Read on.

While I strongly recommend buyers work closely with their Realtors in this area, here are some basic guidelines when submitting offers in the current market:

1. Listen to your Realtor. Realtors work the market every day. They know the market. They know what works and what doesn’t.

2. Don’t think you can low-ball the seller and win the property. While this works occasionally, it’s working less and less in today’s competitive marketplace… even with fixer-uppers. Offer a reasonable price. In our current competitive market, it’s not uncommon for properties to sell for ABOVE the list price. I’ve seen properties with 20+ offers, so you can imagine, many of those offers end up well-above list price. Work with your agent to determine a “smart” price, since too high an offer can hurt you, too (because of appraisal – ask your agent to explain this).

3. Don’t ask for “everything”. There are many different items on a contract that are negotiable and paid by either seller or buyer. Sellers like it when buyers pick up many of the “additional costs” that accompany the selling process. The more that buyers offer to pay for, the more attractive those offers are to sellers.

4. Get pre-approved by a lender… and not just pre-qualified. The more “solid” the buyer looks in the seller’s eyes, the better the offer.

5. Put down a larger deposit. This shows the seller the buyer is more serious. Ask your agent what a good deposit is in your market.

6. Listen to your Realtor. No, writing this a second time was not a mistake. I write it again because it’s important to listen to your agent and take his/her advice when writing an offer. They have a vested interest in ensuring you get the property, so listen to their advice.

If you have questions about how best to compete in the current market, please contact me today.

Don Johnson, a Licensed Broker with the California Department of Real Estate, is the owner of Don Johnson Realty Group DRE#01398835, a resale real estate brokerage located in Murrieta, California. We specialize in short sales, rental properties, foreclosures and mortgage lending. If you would like to obtain more information, please contact Don at findyouahome@msn.com or call 714-856-3992. http://www.djrealtygroup.com

# # #

How Much Home Can You Afford? You May Be Pleasantly Surprised…

Provided by Lending Tree

If you’re like many first-time homebuyers, chances are you’ve been spending your weekends driving around visiting open houses and new model homes. This is a great way to get a feel for what you want. The problem is that what you want isn’t always what you should get.

Before you start touring homes for sale, it’s important to start off with a budget so you know how much you can afford to spend. Knowing what mortgage payment you can handle will also help you narrow the field so you don’t waste precious time touring homes that are out of your reach.

Where to begin

The key factor in figuring how much home you can afford is your debt-to-income ratio. This is the figure lenders use to determine how much mortgage debt you can handle, and thus the maximum loan amount you will be offered. The ratio is based on how much personal debt you are carrying in relation to how much you earn, and it’s expressed as a percentage.

The ideal ratio

Mortgage lenders generally use a ratio of 36 percent as the guideline for how high your debt-to-income ratio should be. A ratio above 36 percent is seen as risky, and the lender will likely either deny the loan or charge a higher interest rate. Another good guideline is that no more than 28 percent of your gross monthly income goes to housing expenses.

Doing the math

First, figure out how much total debt you (and your spouse, if applicable) can carry with a 36 percent ratio. READ MORE OF THIS ARTICLE