After many years of the real estate market mostly favoring sellers, buyers are sick and tired of bidding wars and cocky sellers who increase the list price of their house simply because they didn't get an offer above the list price. Is there anything you can do to beat the system and possibly get a better deal?
There are many opportunities for buyers and we see them every day. Especially when a property comes on the market listed by an inexperienced agent who makes serious marketing errors or a stubborn seller who lists too high and eventually pays the price. These marketing faux pas compromise the final sale price which, as a buyer, you can take advantage of.
1. For starters there are many sellers who don't interview multiple agents before listing their house for sale and forego getting multiple opinions of value. Sometimes they opt to list their house with a relative, a friend or an out of area agent who doesn't know values in their area. Turning the situation into an opportunity for you, is when the listing agent doesn't even set a date to review offers and the house can be purchased as soon as it comes on the market. This happens more often than you think and you can act on it.
Example: We sold a house that was drastically under listed because the listing agent did not know the area and used an inferior comparable sold property, that he had never seen, to compare to the one he was listing. Making matters worse for the seller is that he didn't set a date to review offers which may have resulted in multiple offers driving the selling price to its market value. We showed it to our buyer clients within hours of it hitting MLS, brought the seller an offer and procured the house for 10% below its market value.
2. Sometimes the out of area agent under lists a property but does set a date to review offers. He may still be unaware of the true market value of the house, though, and an astute agent can take advantage of this on your behalf as we did for our buyer clients in the following situation:
Example: A house came on the market listed for $729,000. We immediately showed it to our clients and determined its true market value was about $825,000. We spoke to the listing agent who volunteered that he felt he listed the property at market value which confirmed to us that he did not know the area. We were certain that if our buyers waited until the offer date to submit an offer they would have to pay at least $820,000 because the property would likely attract multiple offers. To circumvent this we suggested our buyers submit a bully offer for $780,000 before the designated offer date. We were convinced the listing agent would think it was a great price for the sellers and he would encourage them to accept our offer. The sellers did and our clients got a great deal before the offer date.
3. It's common in today's market for the seller to provide a home inspection report during the marketing of their home. This allows the buyer to contact the home inspector and spend a short time reviewing the report on the phone versus taking three hours off work to attend a home inspection which ultimately makes it easier for the buyer to make you an offer. You would be amazed, though, how many agents and sellers don't believe this is a crucial marketing tool nor recognize its benefits. I can tell you, without a doubt, that sellers who provide home inspection reports during the marketing of their home receive more offers and consequently sell their houses for a much higher price. How can you, as a buyer, take advantage of this short sightedness?
Example: We showed a house to our buyer clients on a Friday, listed for $839,000, and the date set to review offers was the following Tuesday. On Tuesday our clients decided they wanted to submit an offer and would pay up to $900,000 in competition. We tried to book an inspector but were unable to on such short notice. If the seller had provided a home inspection we would have contacted the inspector and, pending a favorable report, would have submitted an offer. But we felt that, in a multiple offer situation, the seller would rightfully give greater consideration to firm offers so our clients passed on the house. This property attracted fewer offers than it should have and sold unconditional for $875,000. It was a good deal for the successful buyers who procured it for below market value. This happens quite often and, as a buyer, you can take advantage of these opportunities by being decisive early, doing a home inspection before the offer date and submitting a firm offer on such houses because you will get a better deal simply because the property will attract fewer offers.
4. Although supply is usually low from December to mid February, buying a house during this time may get you the best deal because sellers are usually motivated, there are fewer multiple offers and your astute agent will be able to negotiate the best deal for you.
Example: As a general rule we don't list properties in December because it's rarely the optimum time to get the best price for the seller, but many people have to sell during this time for different reasons. For example we got a call from someone who had just bought another house, through the listing agent, with a mid January closing forcing him to sell his house just before Christmas. It sold for much less than it would have fetched in a February market and the lucky buyer got a great deal!
Sometimes properties come on the market listed too high and you can take advantage of this. Let's say your budget is $1,000,000 and your agent viewed a house listed for $1,150,000 which he determines is too high but finds out the seller has to sell. Some agents may not show you this house because it's too far from your price point. On the other hand, an astute agent will so they can prepare you to act as soon as the list price is inevitably reduced. If you wait for the price to be reduced before you see it for the first time, you will not likely be in a position to perform due diligence before another buyer snatches the property from under you.
Example: We sold a property that had been listed for $1,579,000 but was accompanied by a few price reductions within a four month period. It was probably worth about $1,475,000 but it languished on the market because the initial list price was too high rendering the property unattractive. We showed it to our buyer clients and monitored it for a few months. They were in a position to act, as soon as the property was reduced to a price they could afford, and procured it for $1,380,000.
We have dealt with thousands of offer situations and are putting forth these opportunities because they do happen to astute buyers who use great buyer agents. Why shouldn’t it be you? To take advantage of these scenarios, though, a few things have to be in place:
1. You have to be available to view a house on short notice.
2. You need to have your ducks lined up;
- financing should be in place so you can make a firm offer
- deposit funds should be available to submit a certified cheque
- be available to do a home inspection on short notice
- your current house should have been appraised and ready to go on the market if you have a house to sell
3. You have to be decisive or another buyer may beat you to the offer table.
4. Most importantly you need to be working with an agent whose judgement you trust, who is sharp, intuitive and experienced.
So hire one of these agents, because there are many, and try to get yourself a good deal.
NOTE: The home prices in the examples have been changed to protect all parties.