Though I’ve read that sales in a few real estate markets around the nation are weak right now, sales in the area where I work are near all-time highs. The inventory of available properties here is the lowest in history, and homes routinely sell for 5 percent or even more than 10 percent over their asking price.
What this means, of course, is that nearly every home that comes on the market draws multiple offers. That’s certainly good for sellers, but it often creates heartbreak for prospective buyers and sometimes forces them to make unenviable, even life-changing choices.
I have represented buyers in two multiple-offer situations during the past several weeks. Neither resulted in my first commission check, but I came away from each a little bit wiser and a little bit richer.
In the first multiple-offer situation I encountered, my clients were a couple in their mid-30s who recently moved here after selling their first home in another area for a profit of about $35,000. They can easily afford to make at least a 20 percent down payment, and they have already been pre-approved for a relatively large loan.
After spending just three days touring available properties, they agreed to make a full-price offer on a sharp three-bedroom home.
The next day, the seller’s agent called to tell me his clients had received 16 offers for the property and 12 of them were either at the asking price or above it. He also let me know my clients had 48 hours to submit another (higher) offer.
I was elated when my buyers agreed to add nearly $15,000 to their original asking price. And I was even happier when the seller’s agent called to say our offer was acceptable, provided that agreed to “a few minor contingencies.”
“A few”? Try 14!
My buyers didn’t mind Contingency No. 4, which said the sellers wouldn’t guarantee that their modified garage was up to code (it wasn’t), or Contingency No. 9, which said the sellers wouldn’t be financially responsible if the pipes in one of the two bathrooms must be replaced (they do).
But my buyers drew the line at the contingency that said the property wouldn’t be examined “by a home-inspection professional or any inspection service.”
In other words, the seller’s counteroffer suggested he’d be happy to accept $15,000 more than his asking price provided that my buyers didn’t demand a professional opinion about the home’s structural condition. That’s a risk my clients didn’t want to take.
Though I was disappointed that I couldn’t close my first deal, my buyers were downright philosophical.
“We wanted the house, but we had to draw the line somewhere,” the wife said. “We know the market’s hot, but that doesn’t mean we have to do something crazy–like buying a house without having it inspected first.”
And, you know what? She’s absolutely right.
I’m glad to report I’m still working with the couple and I’m fairly confident we’ll eventually find another home that’s just as nice, but offered under more reasonable terms.
I don’t think the second couple I recently represented will have such a happy ending. They’re really nice people too, but I’m afraid they just can’t afford to buy anything in our area.
The husband drives a delivery truck, and his wife works part-time as a secretary. They have a beautiful three-year-old and are trying to have a second child.
Combined, they make about $45,000 a year. They’ve scrimped and saved up enough over the past two years to make a modest down payment–somewhere in the 3-to-5 percent range–on a condo or small house, so they can move out of their studio apartment.
I wrote an offer on their behalf for a small fixer-upper a couple of weeks ago. The offer was a little below the asking price, but the offers from the five or six other prospects were in the same ballpark. The seller made a counteroffer to us, asking for another $7,000.
With the national average home price at almost $170,000 and homes in my market selling for much more, $7,000 might not seem like much. On a 30-year mortgage, as any loan officer will quickly tell you, paying back $7,000 would cost less than $40 a month.
For these buyers, however, $40 a month is real money, especially since the husband’s employer is planning to cut back the family’s medical coverage in June, half of the wife’s income is devoured by childcare expenses and gasoline prices seem headed to $3 a gallon.
Nonetheless, they wrote a second offer for $5,000 more than their first. But they were knocked out of the box by another buyer who offered $10,000 more and agreed to make a much larger down payment.
So, this young couple is still stuck in a studio apartment. We were scheduled to go home-shopping again last Saturday, but the wife called me early in the morning and said they’ve put their home-buying plans “on hold” until they decide whether they’d rather have a house of their own or a second child.
Sadly, in today’s red-hot real estate market, they can’t afford to have both.
I feel bad for them. But at the same time, seeing the struggles and sacrifices they are making to buy their first home has made me a lot more appreciative of the house that my own family has.
No one will ever confuse our little three-bedroom rambler with the Taj Mahal, and we’re not exactly in the type of community that inspires TV shows based on our ZIP code. Sometimes, with our two kids (and their countless neighborhood friends) running in-and-out, the place seems way too small.
But last night, when my spouse and I tucked our son and daughter into their beds, my thoughts drifted back to that nice young couple who must decide what they want most–a home of their own or a second child.
I’m grateful I don’t have to make the same choice.
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