How to successfully buy a home in a seller’s market
Ask Phyllis: a blog series of frequently asked real estate questions. Please email us here.
Dear Phyllis,
I look forward to getting the CV Weekly and reading your real estate advice. My son has been trying to buy a home for more than six months. He has made five offers, responded to multiple counter-offers, and can’t seem to get an offer accepted so that he can buy a home. My son is not picky; he wants a three-bedroom, two-bathroom home in the La Crescenta school district. He has been working with an agent who are friends with his wife. I am trying not to be a nosey mother and mother-in-law, but I think it’s time for him to switch to real estate agents. Can you offer advice on how to buy a home in a seller’s market successfully?
Concerned Mom
Dear Concerned Mom,
It is hard not to get discouraged in today’s Foothill real estate market, especially in La Crescenta. Unfortunately, your son is in the same boat as most buyers. I recently wrote an offer for a cash buyer of $235,000 over the asking price. The listing agent provided a physical inspection noting the electrical panel needed to be updated; there was old, galvanized plumbing, and the roof was near the end of its life expectancy. There were eight offers. My client waived all contingencies, even her inspection contingency. She was still beaten out by another buyer who offered a higher price.
If your son works with a full-time, experienced real estate agent who is respected within the community, this is simply a matter of a challenging market. There are two ways to go about this:
1) Focus on homes initially listed too high and have been on the market for over two weeks. There could be some wiggle room, and your son should have less competition.
2) Your son needs to be submitting aggressive offers. I hope that an experienced local reputable lender has pre-approved him.
3) In addition, he should also consider waiving the appraisal contingency as well. Lenders base their loan amount on a percentage of the appraised value or purchase price, whichever is less. There are numerous components to a firm offer in addition to the price. When the price offered is contingent upon the home appraising – the buyer has an “out.” Many buyers write an offer with an appraisal contingency, meaning that they can cancel escrow and return their deposit if the home does not appraise for the total amount. As homes sell for record-breaking prices, many appraisals come in at less than the agreed-upon sales price. This is a good tool if your son has a large enough down payment.
However, as I don’t know your son’s finances, I suggest he discuss both options with his lender and real estate agent—best of luck to him.
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