Home Buying: When an Offer Negotiation Becomes an Auction

February 21, 2012 By Leave a Comment

Since 2006 the real estate market has been such that it was uncommon for more than one buyer to fall in love with the same house at the same time.  But as I have been mentioning for several months, homes for sale inventory has dropped dramatically from a year ago while the number of buyers in the market has ballooned.

The last 5-6 years has programmed most buyers to believe that they must negotiate the price of the home to ensure they get a “good deal” and that sellers have no other choice than to work with them.  Well given the how much tighter supply is today, it is not uncommon to see two or more buyers interested in the same house.

When you are the only offer on the table, the seller has no other choice but to negotiate with you if they want to sell.  The moment a 2nd buyer enters into the picture though, now buyers are not negotiating with a seller but rather bidding against another buyer.  You’re no longer in a negotiation – you are in an auction… a silent auction at that.

When in a multiple offer situation I always advise my clients to put their best offer forward first since in most cases I have seen, the buyer won’t have a chance to sweeten their offer later.  Many buyers are frustrated by this but if you look at it from the seller’s point of view, why would you work with the weaker offer when you can work with the stronger one instead?

As we go in to the spring months we will see even more buyers enter the market and while we will have more homes come up for sale as well, the truly premium properties in an area/price point will have the highest level of interest and thus the most buyer competition.  My advice for buyers today is that if you fall in love with a house, make that offer as soon as you can.  A day or two (sometimes even hours) can make the difference between being in a negotiation or an auction.

Filed Under: Info for Buyers, Market Stats, Opinion, Personal Experiences

Condos Losing FHA Approval Risk Losing Much More

February 16, 2012 By Leave a Comment

Over the last few years I’ve encountered more and more condominium projects that have lost their FHA project approval and have written on the issue before.  What does it mean when a project loses approval?  Buyers in those developments will not be able to secure FHA financing for their purchase.  In 2011, approximately 9% of all condo sales were financed by the buyers using FHA financing.

9% seems small, right?  Well yes it is relatively small, but since there are currently 6.5 months of supply of condos (still a buyer’s market and much higher than townhomes and single family) anything that reduces the buyer pool can impact the salability of the units in that development, leading to potential price declines or even perhaps more foreclosures if sellers cannot unload their homes and cannot afford to stay.

Considering so many developments have lost their approval, associations that can maintain or reinstate their FHA project approval will find themselves attracting more buyers to their development than one that does not have FHA financing.  More buyers mean more sales, and potentially higher prices as well.

Not sure if a development has approval?  Here is FHA’s project approval list.

Filed Under: Community Issues, Info for Buyers, Info for Sellers, Mortgage Guidelines

Quick Tips: Boost Your Credit Score For Better Mortgage Rates

February 11, 2012 By Leave a Comment

Credit scores play a huge role in today’s mortgage market. Blame it on the high default rates of the last half-decade brought on by lending standards that let anyone borrow almost any amount of money. Lenders are reserving their lowest rates for the customers that are most likely to make on-time repayments and history has shown that the higher your credit score is, the lower risk you are.

Mortgage rates are near an all-time low in Minnesota. However, the low rates you see advertised on TV and online are only available to the home buyers and would-be refinancers whose credit scores are pristine. Having a high credit score is often the difference between getting “the best rates” from your lender, and getting something worse.

The first part of improving your credit score is understanding how it works. In this 5-minute piece from NBC’s The Today Show, you’ll learn the basics :

  • Why you shouldn’t close a credit card after you pay off a large debt
  • What is the maximum balance to leave on your credit cards, relative to your credit limit
  • What types of credit checks harm your credit scores, and which ones don’t

You’ll also learn how to shop for a mortgage with multiple lenders without having your credit score “dinged”, as well as several proven methods to raise your credit score quickly.

In the end, good credit scores are the result of paying bills on time and staying with your means. Those with the best scores, get the best rates.

Filed Under: Info for Buyers, Mortgage Rates, Personal Finance Tagged With: , ,

Twin Cities Traditional Home Sales Surge in January

February 10, 2012 By Leave a Comment

January 2012 saw traditional home sales surge 28% versus January 2011 after having also posted 21% gains in December versus the year prior.

January 2012 Twin Cities closed home sales. Data derived from RMLS. Image courtesy Minneapolis Area Association of REALTORS.

As foreclosure and short sale inventory continues its decline and buyer demand continues to rise, buyers are coming back in force into what used to be our bread-and-butter housing market: the traditional home seller. One concern has been whether buyers who had grown accustomed to the bargains offered by foreclosures would be willing to purchase a more expensive home listed by a traditional seller. As recent months have shown, when buyers have no alternative, they will buy traditional seller properties.

Filed Under: Info for Buyers, Info for Sellers, Market Stats
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TwinCitiesRealEstateBlog.com is not a Multiple Listing Service MLS, nor does it offer MLS access.
This website is a service of Aaron Dickinson of Edina Realty, a broker Participant of the Regional Multiple Listing Service of Minnesota, Inc.