Tuesday, January 29, 2013

3 Tips To Getting a Contingent Sale Offer Accepted

A contingent sale offer is an offer that is accepted under the pretense that the buyers still have a home to sell.  It is a stressful situation for both the buyers and the sellers.  Sellers fear that the buyer's old home won't sell, is over-priced, or will take too long to sell.  On top of that, the sellers may have a new home or life situation lined up that relies on their home being sold in a specific time frame as well.  Buyers making offers contingent on the sale of their home are hesitant simply because it is an uphill battle to get their offer accepted to begin with, not to mention the logistical difficulties of overlapping the move schedule for two different homes. 

Honestly, contingent sale offers are very difficult to get accepted.  If one piece of the the puzzle drops out, it could affect several other purchases or sales that are based off a single contingency.  Although difficult, here's how to present a contingent sale offer for best results:

1)  Show Them The Money
In real estate, money can make anything better, right?  Fears and apprehensions fall by the wayside if you're able to show them the money.  Contingent sale offers have an increased risk of never closing, and you need to be able to come up with a strong case to get your offer accepted.  This isn't a situation where you can low-ball and get your offer accepted.  Have your Realtor pull comparable properties and pay the fair value of the home, no more/no less.  If possible increase your down payment to show the sellers that you're financially stable, and always include a lender's prequalification letter.  

2)  List Your Home Prior to Going Under Contract on a New Home
It may seem like a no brainer, but how serious would a seller think you are if you haven't listed your home yet?  Not having your home on the market shows that you don't have your act together, and will only be wasting more time - de-cluttering, finishing projects, painting, etc...If absolutely need to sell your home in order to purchase a new home, get it listed as soon as possible, before you even think about putting in an offer.

3)  Prove How Quickly Your Home Will Sell
Along with the offer, include a listing description of your home, along with several other comparable properties for the seller's agent to review.  This will do several things: 
  • Shows the sellers that you are serious about selling your home and buying theirs
  • Shows that you are fairly pricing your home for a quick sale
  • Verifies the condition of your old home
  • Indicates how quickly everyone can assume a sale of the old home
In this market, a reasonably priced home will sell within 20-35 days.  There is no point to over pricing your old home while putting in a contingent sale offer on a new home. 

With property preparation and cooperation, contingent offers can be a win/win for all parties involved.  Sellers need to carefully weigh the risks and rewards of accepting such an offer, and buyers need to make it worth the risk for the sellers.  Cooperation is certainly key to making a contingent sale deal go through.

Jared Reimer is a real estate expert at Prudential Rocky Mountain Realtors in Northern Colorado.  Real estate is his passion and he always wants to connect with like-minded and savvy real estate fans.  For more information or to get in touch with Jared, please visit his website at www.ReimerRE.com or email him at JaredReimer@ReimerRE.com

Tuesday, January 22, 2013

Why It's Tough to Be a Buyer Right Now

Flashback to 2009 or 2010 when the market was flooded with gorgeous properties at attractive prices.  All you needed to do was qualify for a loan and you could take your pick of the cream of the crop.  You had nothing but time.  If you were investing in real estate at the time, you were probably a happy camper.  Short sales, foreclosures and other distressed properties ruled the land, and you had abundant inventory, time and money.

Fast forward to January 2013.  Buyers who would kill to have similar purchasing conditions are scratching their heads asking, "Did I miss the boat?  I thought this was a buyer's market, my Realtor told me it was 'safe' to buy again..." 

Several of the buyers I've been working with have had a tough go over the past few months, here's why:

1.  Low Inventories
The single largest issue facing buyers right now is a lack of inventory.  In December of 2007, there were 2840 active listings in Loveland/Berthoud and Fort Collins.  In December of 2012, there were only 1317 active listings - a total reduction of 53%.  The absence of available homes to purchase starts the ripple effect for all buyers.  Even disregarding rising prices (#3) or high levels of competition between buyers (see #5 - Multiple Offer Situations), some buyers will not find a home simply because what's out there won't fit their needs. So they wait, and wait, and wait.

2.  Financing Restrictions
In the recent hey-day of real estate (the Mid 2000's) money was easy to come by.  Interest only loans or 0% down loans were all the rage.  Real Estate was appreciating and all was well in the world.  Nowadays 0% down loans (outside of USDA and VA) are impossible to come by, and you're more likely to get struck by lightning than getting approved for an interest only loan.  Easy money isn't easy anymore.  Money is tougher to come by and lending restrictions are much tighter.  Expect to deliver more paperwork to your lender, justify your finances, income and credit, and be more forthcoming than you thought you'd ever have to be.

3.  Rising Prices
A funny thing happens when low inventories are present, prices have to rise.  Its a basic law of supply and demand.  Because there is more demand than supply, prices will slowly start to creep up because frustrated buyers are willing to throw a little more money into the game, just so they can stop playing and enjoy living in a new house.  #4 and #5 are both causes of rising prices.

4.  Reduced Distressed Properties
More homeowners are doing better these days, meaning fewer and fewer are being forced into foreclosure and short sale situations.  Over the past 2 years, the number of foreclosed properties have fallen steadily (and sharply at that) in the Northern Colorado region.  Because distressed properties originally caused the price declines, having fewer "negative" properties on the market help lift the market as a whole.  On top of that, the distressed properties that are on the market are getting bought faster, and for nearer list price than they were in the "bad years". 

5.  Multiple Offer Situations
I alluded to this point earlier - increased competition causes prices to rise.  Unfortunately, the world of multiple offers is not an easy one.  Finding the perfect home, reviewing the comps and ultimately putting in an offer is stressful enough, until you find out there are 3 more offers out there.  You may ask yourself, "How badly do I want this house?".  You talk yourself into (and out of) paying more for a home.  You justify why or why it isn't worth it to raise your offer.  Ultimately, you shell out a little more money, or you move on without getting the home.  The competition is stiff, some of these buyers have been looking since the late summer and they know what's at stake.  You're another casualty in the multiple offer battle.

Ultimately, given the right strategy and preparation, buying doesn't have to be so difficult.  Understand the swiftness of the market before you jump in so you know a good property when you see it.  Talk to your Realtor about how to gain a competitive edge and craft a winning offer.  It's all about understanding the market so you know exactly what to expect.  That's how buyers win in this ever changing market.

Jared Reimer is a real estate expert at Prudential Rocky Mountain Realtors in Northern Colorado.  Real estate is his passion and he always wants to connect with like-minded and savvy real estate fans.  For more information or to get in touch with Jared, please visit his website at www.ReimerRE.com or email him at JaredReimer@ReimerRE.com

Tuesday, January 15, 2013

Recovery: The Numbers Don't Lie

Real estate in Northern Colorado has come up a long way from bottom and we're beginning to climb out of our not-so-deep hole.  A lot has been made nationally about prices of real estate still being at depressed levels.  While that is the case in some neighborhoods regionally, values have begun climbing.  2011 was a better year than 2010, and 2012 was much better than 2011 -  the numbers don't lie.

In the 3 major Northern Colorado markets, median value increased (with the exception of Ft. Collins attached just being above 0% gain), quite substantially during 2012. Greeley/Evans home values are up over 16%, however, their gains are due mainly to larger losses in 2011 while being hardest hit by foreclosures and short sales. That is not to say that a 16% gain should be negated, by no stretch of the imagination, it is a wonderful gain that reinforces the trend of the greater region.

On top of increased median values, total volume and listings sold exploded in 2012:  more real estate is moving.  'Volume' is a summation of all the sales prices of all the listings that have sold in a given time period.  More listings sold with a higher median sales price means increased volume, another positive trend.

To reinforce the positive trends, days on market, the time it takes from initial exposure to the market through closing is decreasing, meaning its taking sellers less time to sell their homes.  A swifter market is good for both buyers and sellers.

Although we may not see major gains in total volume and listings sold because we have less of a hole to dig out of, we will still see increases in list price.  As new construction ramps up in the summer time, our inventory levels will grow and sales volume will respond accordingly.

Jared Reimer is a real estate expert at Prudential Rocky Mountain Realtors in Northern Colorado.  Real estate is his passion and he always wants to connect with like-minded and savvy real estate fans.  For more information or to get in touch with Jared, please visit his website at www.ReimerRE.com or email him at JaredReimer@ReimerRE.com

Tuesday, January 8, 2013

6 Predictions for Northern Colorado Real Estate in 2013

A new year is upon us, and with that, brings another set of predictions and resolutions.  2012 was a transitional time for real estate in Northern Colorado.  We started the year unsure of recovery, and ended the year up over 20% in volume and sales. I know 2013 will continue the positive trend.  Here are my 6 predictions for Northern Colorado real estate in 2013.

1) Values Will Rise
Because of increased demand, and lack of inventory, buyers are getting competitive with their home searches.  When buyers see a home they like, they need to be quick on making a GOOD offer, before getting beat out by another buyer.  It is because of that competition that prices will continue to rise.  We will see increased competition, which will lead to either multiple offers or near 100% offer to list price ratios.  Understanding the competitive nature of the market, savvy sellers and Realtors will increase initial list prices to hopefully squeeze a little more profit out of a home sale.  Only a major jump in available homes will negate the rising home values.

2) Inventories Will Slowly Rise
Over the past two years, active inventory levels (homes that are on the market but not under contract) have fallen.  This has been both good and bad for the industry.  Originally, inventory levels were at what seemed like near "all time" highs because so many people were trying to sell their home and there were no buyers interested.  Proverbially, they were all trying to jump off the sinking ship. 

Since then, by the passing of time and increased economic confidence, those homes eventually sold and we saw more reasonable inventory levels.  Since then however, those who 'could' sell their home have sold their home, and those who couldn't (due to employment or negative equity) have been waiting on the side lines.  Now that we are on the upswing, more and more folks will be able to sell and more active listings will be on the market, giving sellers more to choose from, and an overall healthier market.  Let's also not forget those who bought under the first time home buyers tax credit, who were obligated to stay in their home for 3 years before re-selling.  The last remaining push of those buyers could possibly turn to selling in the first and second quarter of 2013, bolstering inventory levels.

3) Time on Market Will Decrease
Time on market is a major indicator of how stale or furious a particular market can be.  The shorter homes are on the market, the quicker the market is moving.  This indicates that there are willing buyers making acceptable offers in a shorter period of time.  Over the past few years, days on market (DOM) from list to close has been over 115-130 days.  Over the course of 2012, however, we saw that number decrease, although not dramatically, breaking the 100 day mark within a few micro markets.  This is all a great indication of where we're heading.

4) New Construction Will Strengthen
As mentioned above, active inventory levels are very low, leaving buyers less choice in selecting a home.  Over the past 5 years, new construction has been at a near stand still.  Builders and developers understand the pent up demand and lack of available homes and have been quick to put a shovel in the ground.  My prediction - new construction will be a major catalyst for economic growth and stability over the next 3 years, and maybe beyond.

5) Foreclosures and Short Sales Will Decrease
If you're still sidelines, waiting for the effects of a "shadow inventory", you're probably missing the boat.  Foreclosure activity has been falling substantially over the past year, even 20-30% year over year in most parts of Northern Colorado.  This is extremely good for the market.  Most buyers low ball or get discounts on foreclosures and short sales due to their inherit risks.  These reductions are sometimes compared to more traditional sales, dragging down neighborhood values by comparison.  Now, even short sales and foreclosures sales prices are moving much closer to original list.  The reason behind fewer distressed properties is because fewer homes are underwater, either due to improving real estate markets, or improved employment or financial situations.  Even homeowners at or near negative equity know that if they will be able to potentially sell with just another year or two of continued growth and appreciation.  The future is looking bright for those homeowners.

6) Optimism and Confidence in the Market Will Increase
Because of the items listed above, I know that the consumer will once again feel safe to buy or sell a home.  On top of that, we are all ready for a change and can see it coming.  Hope is returning, especially in Northern Colorado, and confidence and activity in the housing market will be a major contributor to our overall economic picture. 

Jared Reimer is a real estate expert at Prudential Rocky Mountain Realtors in Northern Colorado.  Real estate is his passion and he always wants to connect with like-minded and savvy real estate fans.  For more information or to get in touch with Jared, please visit his website at www.ReimerRE.com or email him at JaredReimer@ReimerRE.com