The hottest question in real estate right now
How much should I offer in a hot market?
Dear Mark and Scott,
I’m looking to sell my existing home and buy a smaller condo or townhome. I am curious about pricing and dealing with multiple offers, both for the listing of my home and buying/bidding on a condo or townhome. How do I go about determining how to price my home competitively while still capitalizing on high buyer demand and low inventory, and also making the best possible offer for a new residence?
—Curious Seller and Buyer
Dear Curious Seller and Buyer,
These are great questions and ones we deal with regularly. A lot of buyers don’t realize there is a lot more to an offer than price. While price is certainly at the top of the list, making an offer that will give the seller the confidence the transaction will be completed is just as crucial.
There are many factors/terms a buyer can work with to make an offer more attractive. These include dealing with loan terms, splitting or covering transfer fees and taxes, adding an escalation clause, waiving inspections and/or appraisals, offering to buy furnishings outside of closing, and being flexible on how many days to close.
Understanding the seller’s priorities can be a game changer in terms of coming up with an offer that best suits the buyer’s needs and interests.
Buyers — Determining what to offer
In terms of price and what to offer, fair market value is always the best starting point. Another factor is how desirable the house is for the buyer and how badly they want it. Fair market value can be calculated by looking at current activity on particular properties, including showings and offers. Any sale, whether it is through the MLS or not, is public record and that is the information Realtors and appraisers are using. Yes, it has been an evolving market and things can change fast. Looking for the most recent sales of similar homes in the immediate area are the best gauge for determining fair market value.
If it is a multiple offer situation, buyers should offer what they are comfortable paying for the home and explore other ways to make the offer more attractive. Cash is still king so a buyer might want to be more attractive on price if financing and look at including other terms as noted above, which can make the offer more attractive to the seller. At the end of the day, the home has to appraise for the contract price if it is going to be financed. Bottom line is there aren’t any second chances and it’s important the buyer is comfortable and at peace with the offer.
Sellers – Pricing your home and evaluating offers
Again, fair market value is the best place to start. If a seller comes onto the market too high, the property may sit on the market, even in a strong seller’s market. If it’s priced right, dictated by the market or fair market value, there is a strong chance interested buyers will bid the price up or make concessions in the offer to make it more attractive.
To determine fair market value, looking at recent sales of similar properties in the same neighborhood, as well as age, any recent remodels or upgrades, square footage, views and condition also come into play.
When evaluating offers, price is important but certainly not the only thing to consider. When looking at multiple offers, sellers should choose the one that puts them in the best situation and with the most confidence to close. Look for an offer that works based on timing and flexibility needs, especially if it includes looking for a replacement property. Other factors include if it is a cash offer or loan. If there is a loan, an appraisal will be required. In this case, the highest offer isn’t necessarily the best offer. There are also inspection contingencies to consider as well as looking at who is doing the loan and how much money is being borrowed.
There are many factors to look in both making offers as well as accepting them. This is where working with an experienced Realtor can be a valuable asset as he/she has the market knowledge, access to data and relationships to navigate and negotiate a variety of price points and terms that create win-wins for both parties.
Good luck in your search and sale,
Mark & Scott
Mark Weinreich and Scott Marino are longtime Vail Valley residents and award-winning broker associates with locally owned Berkshire Hathaway HomeServices Colorado Properties. Mark’s expertise is in the resort/luxury market based out of the Beaver Creek-Villa Montane Office with Scott specializing in the down valley market in the Eagle office. Their micro-market knowledge and expertise allows them to assist everyone from sellers to first-time buyers to second homeowners to the resort/luxury investor. Mark can be reached at 970-376-3204 or Mark@VailMtnRealEstate.com and Scott at 970-390-7406 or firstname.lastname@example.org.