Winning a Multiple Offer

Q.  How can I compete if there are multiple offers?

A.  Many buyers are finding themselves in multiple-offer competitions in our current market.

When inventories of homes for sale are low and interest rates are also low, buyers can expect to run into competition.  Even in slower markets, the best listings at the best prices can generate more than one offer.

Some buyers shy away from multiple-offer competitions for a variety of reasons.  They may be afraid of overpaying.  They might have lost out before and don’t want to go through the agony of defeat again.  Granted, a multi-bid encounter increases the anxiety level of the home buying experience.  But, if you are successful, you have the benefit of knowing that you’ve brought a home that was high in demand.

The key to avoid over-paying in a multiple-offer competition is to have a good grasp of current market values in the area.  To develop this expertise, look at a lot of listings.  Then, follow up with your real estate agent to find out what these listings sold for.  It’s also helpful to know how many offers there were.

Buyers who haven’t done their homework may not have a sense of how much they should offer when there is more than one offer.  If you haven’t educated yourself about selling prices, you may feel uncomfortable offering significantly more then the asking price even through this may be precisely what you need to do.

One thing you can do is write a letter, to be attached to the offer, telling your story.  Usually the sellers have an emotional attachment to the property and they want an idea of who will be living there.  You might even want to include a picture of your family.

It helps to work with a real estate agent who has intimate knowledge of the area in which you want to live.  He or she can educate you about the listing and selling prices as you spend time together looking at listings.  Some buyers find it helpful to take notes and keep a file of listing flyers.

In general, the offer that wins in a multiple-offer competition is the one with a combination of the best price, the shortest closing and the fewest contingencies.  A contingency is a condition that must be satisfied before the transaction can close.  Typical contingencies are for inspections and for the buyer’s financing.  Preapproved buyers have an edge because they don’t need a financing contingency.

Some buyers are choosing to waive contingencies in order to make their offers more attractive to the sellers.  But, it’s risky to waive a contingency if in fact the contingency must be satisfied for the transaction to close.

For example, an appraisal contingency makes the contract contingent on the property appraising for the sale price for the purposes of obtaining a mortgage.  If the property appraises for less than the sale price and you don’t have the protection of an appraisal contingency, your deposit could be at risk if you back out of the deal.  If the appraisal comes in low and you choose to proceed with the transaction, you’ll need to make a larger down payment to make up the difference between the appraised value and the sale price.

Posted on May 20, 2013 at 8:38 pm
Admin Clayton | Category: Buying, Real Estate in the News, Real Estate Terms

Do Short Sellers still have Tax Forgiveness?

Lynne French – Real Answers

Q.  We are in the middle of a short sale.  A tax forgiveness measure was supposed to expire on December 31, 2012.  Did it expire?  If so, I heard I will be taxed on the forgiven amount as ordinary income.  If this is the case should I let the bank foreclose instead?  Would I be taxed on the forgiven amount in a foreclosure?

A.  The measure you are referring to is called the "Mortgage Forgiveness Debt Relief Act of 2007."  This measure could pertain to short sales, foreclosures, deeds in lieu of a foreclosure or modifications.  Your tax professional would determine how this would affect you in each situation. Technically it did expire for 24 hours but then was extended for 1 year.  I have no idea if it will be extended again.  So you seem to be safe for now, but please confer with your tax professional.  

Industry experts expected the bill to be extended.  It had bipartisan support in the house and the senate.   Congress didn't seem to feel it was a high priority within the "fiscal cliff" negotiations so the extension actually was allowed to expire briefly, causing much anxiety for people like you.  The National Association of Realtors and others lobbied hard to keep it in the forefront.  Forty-one state attorneys general appealed to the House and Senate for the extension.

Not to extend it at this point made no sense.  It would have hurt the very people that the short sale or loan modification was supposed to help.   How could people who can't afford their mortgage be able to afford this huge tax bill?

Some home owners who are paying their mortgages on time have suggested this tax forgiveness is unfair to them. Perhaps it is, but anything that will help keep the housing market improving is good for the economy. 

 

Q.  Our swimming pool is about 30 years old.  It could use a facelift.  We don't use it much anymore and are considering filling it in and maybe planting a lawn there versus replastering.  How would these alternatives affect our property value?  We might sell our home in 5 to 10 years.

A.  A sparkling, inviting pool can add value to your property.  If it is not spectacular an appraiser won't add much value for it.  Many buyers definitely want a house with a pool.  Most of those want one that is in near perfect shape.  They might be willing to do some repairs but any repairs needed on the pool will lower the amount they would be willing to pay for your home.  There is the other buyer who absolutely does not want a pool.  Perhaps they had one in the past and don't want to deal with the expense and the upkeep.  And there is the other buyer who is ambivalent whether there is a pool or not.  They would not buy a house with a pool that needs a lot of work though.

How large is your lot?  If the pool takes up most of the yard, it won't be appealing to most buyers.  People usually want the yard to be a recreation center.

What I would suggest you do is compare the cost of filling in the pool and landscaping the area with the cost of replastering and repairing or replacing anything else that is needed.  Also factor in the maintenance cost of each.  If you are still going to live in your house for 5 to 10 years, which type of yard would you enjoy having?  Your quality of life is very important.

I have noticed one truth in Real Estate.  If there are things about your home that you value and enjoy, it is not hard to find a buyer who will also value and enjoy your improvements. 

 

Q.  What is something new that makes an area desirable?

A.  The California Association of Realtors put out “One Cool Thing” which is the Walkability Index.  It is a new measure of the desirability of an area.  This is the proximity of amenities such as restaurants and shops, and community hubs such as schools, parks and libraries.  Walk scores range from 0 to 100, and any rating above 70 is considered “very walkable.”  You can check a walk score in a specific city or neighborhood at www.walkscore.com.   I am proud to say that Clayton has been named “Most Walkable City” in the past.  And it has been named in Money Magazine’s Top 100 “Best Places to Live” three times since 2007.  Each time they cited the extensive walking trails.

Posted on January 24, 2013 at 5:07 pm
Lynne French | Category: Government & Real Estate, Home Improvement, Real Estate in the News, Real Estate Terms, Selling | Tagged