Originally, I was going to write this post back in December, but I wanted to make sure that the momentum was going to carry through to 2010 before writing it. With inventory at record lows, the fear of rising interest rates and the overall feeling that the San Carlos market has bottomed, San Carlos demand has surged over the past three months.
In October and November we saw this demand really take hold in the 750K-950K market. Since December, that new-found demand has crept up and over the 1M mark. Both are very good indications of a market that is stabilizing. While the demand has spurred home sales in San Carlos with multiple offers once again, there are some not-so-subtle differences between the multiple offers situations we have now, and the ones we had a few years ago. Those differences are detailed below:
1. List prices are not considered a “starting point”
In years past, the list price was a mere data point. The real question in the multiple offer situation was how far over the list price you would go. Not today. In fact, with most multiple offers we are seeing today, bidding at the list price or just below it will probably put you in the running. As you will see below, the offer price is just one of many factors in deciding the winning bid.
“Cash is King” has never been more true. In years past, the winning bid was usually the highest bid with at least a 10% down payment and a reasonable contingency period. Very little thought was ever given to items such as the property appraising for value or other pitfalls in the mortgage industry. A massive overhaul of the mortgage industry, including more stringent lending guidelines now has listing agents going over the financing with a fine-toothed comb. As discussed in a previous blog post, the appraisal issue in San Carlos is a complete disaster right now. That statement is not an exaggeration, and I took quite a bit of heat for that particular post, but it is the reality of what is happening. As a listing agent, you have to anticipate that the appraisal is going to miss and come in low. Therefore, with most banks not willing to depart from their 80% loan-to-value ratios, those offers which have a greater than 20% down payment become even more valuable. In other words, the highest offer may not be your best if the down payment is only 20%.
3. Buyer Commitment
This one is a little off-beat, but it’s certainly one thing I look for in a multiple offer situation. Each transaction is unique and will present its own set of obstacles. As a listing agent in a multiple offer situation, some serious consideration should be given to each particular buyers’ commitment to the completing the transaction. A good listing agent will keep track of who is doing what in preparation for the multiple offer presentations. How often did the buyers go back to the house to preview it? Did they take the time to read over all of the disclosures ahead of writing the offer? How long have they been looking for a house? Have they put other offers on homes before? What will their response be if the house does not appraise? If you ask enough questions of their agent and you are diligent about watching who comes in your open houses, you can usually get a pretty good sense of who really wants the house badly enough to stick with a process that is less than seamless these days.
In a multiple situation, yes, your agent matters. With the more relaxed guidelines of a few years ago we did not have the bumps in the road that we have now. If your agent is not capable of being pro-active in the situation, a good listing agent will pick up on that fact and express those concerns to the seller when considering your offer. There are some agents in San Carlos who are excellent in this type of situation and can really make the process much easier. I would argue that because of all of the unpredictable factors that go into a home purchase these days, your agent selection is more important than ever. I cannot speak for all agents out there, but for me, the buyer’s agent in a multiple offer situation does make a difference.