For the first time, I now have more listings under contract at Mueller Austin, TX that are off the market than are on the Mueller MLS. It’s indicative of the market here – very short supply for homes under $600,000. People don’t so much house hunt at Mueller, they house stalk. I remember when two clients of mine got a business card on the home of their South Austin home. It was from another real estate agent, and on the back was a hand written note – “I know someone who wants to buy your home.” They promptly called me to ask what was going on. I explained that it was just a marketing gimmick, and that all of their neighbors probably got the same card – it was just an agent fishing for listings.
Fast forward three years, and I’ve become that agent. I have one client who is stalking either a David Weekley Mansfield plan or a Meritage 1903 (Benson, Royal, Pena etc). We looked at how many of each there are in the development, and I sent letters to the owners asking them if they had any intention of selling. If my first client passes on anything that turns up, I know four other buyers who would be interested. It’s not a gimmick. It’s a sellers’ market.
With homes not even hitting the MLS before attracting multiple offers, what can a buyer do to ensure that they get a home on the resale market here? Here are my top three suggestions
- Be ready. This sounds silly, but being able to demonstrate that you’re a ready, willing and able buyer makes a huge difference when you’re putting in an offer – especially if the seller has multiple offers from which to choose. In practice this means that you should be pre-approved with a lender if you are pursuing a loan, and have proof of funds available if you’re using cash. As a listing agent, I prefer to see a lender who is local and who I can get on the phone rather than a national lender who relies on a call center. More accountability leads to more predictable closings. And there are some lenders who have a reputation for not closing in a timely fashion. Also, if you’re house stalking, be ready to see the homes when they become available, or at least send a trusted delegate. I had one agent who offered to come to one of my listings and use FaceTime on her iPhone to show her out-of-town clients a home.
- Write a strong offer. Be ready for multiple offer situations, and know what you’re highest and best offer is ahead of being asked for it. I’m not suggesting that list prices are always set correctly, so don’t take the HGTV advice of “offer $1000 more than list price”. You need to look at comparable sales and figure out likely pricing before homes become available. That way you will know when a home is priced reasonably. Odd pricing cuts both ways – I saw a home listed below $280,000 that I knew was worth more than $310,000. And it’s not all about price. Finding out what a seller wants makes it much easier to figure out an offer that suits. That could mean a seller leaseback after closing (they may need time to move), a buyers temporary lease before closing (it may eliminate a sellers holding costs if they’ve moved), a fast close or something else that makes your offer stand out. One thing most sellers would like is to pay less of the MUE02 fee at closing.
- Consider the option fee and option period. I could bundle this up in write a strong offer, but I think it deserves special attention. The option fee is an indication of how much you think you’re going to buy the home. With an older home which may have more inspection issues, typically a buyer will be cautious at first -after inspection it may be that the seller will not reasonably negotiate any of the things asked for, and it may be that the buyer wants to back out. In this scenario a low option fee makes sense – say $100-$150 for 7 days. With a newer home in a multiple offer situation, if a seller has three equivalent offers to choose from, they are more likely to go for an option fee of $500 for 6 days, than one for $200 for 10 days or $150 for 7 days. The buyer has more skin in the game. They still have the option to exit the contract (for any reason whatsoever) so the buyer is protected if something untoward shows up as part of their due diligence, but a high option fee sends a message that the buyer intends to close. A seller’s fear that a buyer will just pay $100 to buy them more time to think about buying their home can easily be allayed. And the option fee can be refunded at closing.
One question I had recently when discussing the seller’s market was quite justified – is there any price gouging at Mueller? I haven’t seen any yet, and I haven’t seen any sellers countering that a contract shouldn’t be subject to appraisal – the third party check and balance to make sure people aren’t overpaying for a home. Typically when a market shifts, it takes the sellers a while to cotton on to the fact, and adjust their expectations accordingly. I’ve had the lucky task of telling a few sellers lately that their homes are worth more than they expected, and then proving it with offers. One rule of thumb in real estate pricing is to price ahead of the market; if prices are dropping, price where the market is headed so that you aren’t constantly chasing the market down and missing out on buyers. If the market is going up, price where you think it will be when the home is appraised.
Get in touch if you’re thinking of selling a home in the next six months. Why six months? Because even if you want to stay in your home for six months, I know some buyers who will offer you a 6 month lease after closing. 512 215 4785