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Dear Leigh and Mary,
I keep reading about the low inventory and multiple offers for properties in the mountain resorts and pretty much anywhere in Colorado. I have the means for a down payment and hope I can find a home or condo in the Vail Valley I like and can afford. Appreciate any tips you can share for buyers in a seller’s market.
–Looking to Buy
Dear Looking to Buy,
There’s one phrase which strikes fear into the heart of any potential homebuyer: “Seller’s Market.” It can cause undue anxiety and lead to potential buyers writing offers on anything and everything in hopes of having their offer accepted.
We are advocates of encouraging buyers to slow down and consider their purchase carefully. Buying and owning a home is a major financial investment and should be given due thought and consideration.
An important question when looking at homes is: “Is the home the right fit for your lifestyle needs and budget?”
If the home is the right fit, there are some things you can do to make your offer more attractive to the sellers and increase the chances of getting the property.
Spend time researching the market. If you’re not sure where to buy, spend time doing some research. While on-line services like Zillow give an overview, working with a local Broker, and spending time discussing your interests before you visit the area (if from out-of-town) can save you a considerable amount of time and frustration. Seasoned brokers bring insight and experience that will allow them to zero in on your best options. With low inventory, you may need to expand your property search into different neighborhoods that you may never have considered.
Understand the pros and cons of complexes. Buyers looking to buy a condo or townhome should choose a seasoned, local Broker who knows the area and properties well. They will know the pros and cons of different complexes and what constitutes ownership within them, i.e., good management, Homeowners Association reputation and policies, special assessments, Right of First Refusal, restrictions, and history of the building.
Have full pre-approval. A step beyond pre-qualification, a pre-approval involves submitting your full application to underwriting. Pre-approval is stronger than pre-qualification as it requires the buyer to provide the proof of their ability to qualify for the loan.
Increase your earnest money. Earnest money is the deposit typically held by the Title Company. While the contract will dictate how monies are disbursed in the event of a cancellation, increasing the amount offered can show the seller you’re serious. You could also have the earnest money go “hard” after the inspection termination deadline.
Add an escalation clause. In a bidding war, it can be difficult to know what to offer because you want to outbid the competition without going too high. An escalation clause is one way to potentially help you out bid the competition. The clause typically offers an amount you’re willing to pay higher than any verifiable offer up to a specific amount.
Pay any appraisal shortage. When offering more than asking price, sellers become concerned about the appraisal coming in too low. If you are willing to pay over market value, include the amount of shortage you are willing to pay, which is called an appraisal gap.
Remove the inspection contingency. This option can be tricky, but if you are planning a large remodel or are willing to be responsible for fixing any found defects, this can make your offer stronger by accepting the home with no inspection contingency. That being said, you should still have an inspection to understand the property and what you’re buying. Talk with your Broker regarding the necessary steps you can take if it’s more than what you’re willing to take on.
Keep it clean. Make your offer as clean as possible and minimize additional clauses that can confuse the seller. This is where a Broker can really assist. Come in strong from the beginning at a comfortable dollar amount for you. Look at recent comps to see if you should remove some of the clauses like the appraisal and inspection resolution to make your offer more attractive.
Explore local funding and financing programs. There are a number of different local funding programs in the Vail Valley and Eagle County that offer down payment assistance for buyers locally and from out of town. These include the Colorado Housing Financial Authority, Eagle County Down Payment Assistance, and two deed restriction programs, MiCasa Avon and Vail InDEED. Any Buyer is wise to discuss possible options and qualifications with their Broker.
In this fast-moving, competitive real estate market, it’s important to make your offer stand out from the crowd. These are some of the strategies that demonstrate to the sellers you’re serious about buying their home, increasing the chance of having your offer accepted. Remember, you live in the payment! The final decision needs to be one you’re making for yourself and not acting out of fear.
Good luck!
–Leigh & Mary
Leigh Rychel and Mary Gorski are longtime Vail residents and award-winning broker associates with Berkshire Hathaway HomeServices Colorado Properties, a 50-year, locally owned real estate firm with nine offices spanning from Gypsum to Vail to Summit County. Their expertise ranges from mid-priced range homes Down Valley (Mary), to Vail’s luxury and fractional ownership market (Leigh). They can be reached at [email protected] or 970-376-4620 or [email protected] or 970-331-9619.