How to Win a Bidding War
There are many factors driving the enormous demand for homes in the Lake Tahoe and Truckee real estate market. As people are now working from home, many require more space for an office, and are moving to larger homes. Others are attracted to the quality of life that comes from mountain living. Additionally, mortgage rates are at an all-time low.
All of these factors are converging to drive increasing demand. This demand is then driving a reduction of available inventory. This leads to bidding wars, multiple offers, and a seller’s market. As a buyer in a seller's market, you need an agent who can ensure you secure the winning offer!
During this hot market of 2020, I have successfully negotiated the winning offer for many buyers. I am a master negotiator, which differentiates me from other realtors in Lake Tahoe, and is why my clients choose me for their transactions.
Below are my success strategies for buying a home in a seller’s market:
Attitude
It is important to understand the current market conditions. Don't become emotionally attached to any specific property. Once you have identified a home and are ready to make an offer, it is a good practice to identify another property to fall back on. In the event the bidding process drives the price higher than what you can afford, you will have options. This also allows you to remain objective during the negotiation process.
Establish the highest price you will feel good about paying for a particular home. Recognize that anything higher means the property was not meant for you. Setting these kinds of limits in advance will allow you to walk away, knowing you gave it your best shot.
Just because the market is hot – doesn’t mean the home buying experience needs to be stressful.
If your offer isn’t accepted, you can have the sense that another property is out there – one that is meant for you – and a home that you will love.
Being Prepared
The days on market for selling a home in Lake Tahoe has dwindled from an average of 150 days to 30. The speed at which homes are going into escrow means that it is important to be prepared. Before entering a seller’s market, you will need to meet with a loan officer to get a pre-approval on your loan amount. Terms are an important part of the negotiation, and will often be the reason your offer to purchase becomes the winning offer.
You don’t want any surprises. You will want to ensure your funds for the deposit, down payment and any other fees are accessible when you are ready to pull the trigger on a purchase. Additionally, during the negotiation, you will need to be available at all hours for any counter offer discussions or seller questions. Being prepared and available was always key in how my buyers secured the winning offer.
Ability
Offers are scrutinized during any multiple offer scenario. Your ability to purchase the home will also become a part of the negotiation. Having a realtor who can promote you and your offer above the competition can ensure you get the winning offer.
During a seller’s market, contingencies or the need to sell another home prior to buying will not work. You will need to be able to come up with the funds, sometimes in a shorter time period than what we normally see. However, inspection and appraisal contingencies will still remain a part of the contract.
A shorter escrow period can sometimes ensure you have the winning offer. Being ready, willing and able to move quickly is an important aspect of buying a home in a seller’s market.
Willingness
During a seller’s market, you may need to be willing to pay a little more than asking price. This means that if $750,000 is the most you can afford, you may want to look at homes closer to $730,000. In a buyer’s market this logic is reversed. Often buyers will make offers on homes that are slightly more expensive than what they can afford. The negotiation process often led to acceptance below asking price. This isn’t the case in 2020 for many parts of California.
Homes are currently selling at 98% of asking price and some are selling upwards of 105% sale to list price. Rather than starting at the top and attempting to negotiate downward, you will want to look at homes slightly lower than what you can afford. You want as much leverage as possible and may need a little wiggle room in making your offer.
Your willingness to negotiate higher than other offers will often ensure you land the winning offer. When you know exactly what you are looking for and at what price you can spend, you have more leverage in the negotiation process.
As your agent, I work with these factors and have the offer written and ready to go. I watch the hotsheet for homes that have come ‘back to active’ status first thing every morning. Attitude, Preparedness, Ability and Willingness were all factors in the winning offers I was able to secure for my buyers.
How to Win a Bidding War
I love helping buyers land that winning offer. Some buyers had to experience being out-bid a few times just to get educated. Sales prices have increased almost 20% since May of 2020. The lack of inventory and huge demand will always drive home prices upward. If you are committed to owning a home in Lake Tahoe or Truckee, I can work with you to strategize your best approach.
Recently, Lawrence Yun, chief economist at the National Association of Realtors said: “Home sellers are seeing their homes go under contract in record time, with nine new contracts for every 10 new listings.” The strong sales we see at Lake Tahoe is happening in many suburban and luxury markets across California.
“There is no shortage of clients or home seekers, but that scarce inventory remains a problem,” says Yun. “If 20 percent more homes were on the market, we would have 20 percent more sales, because demand is that high.” We have had a record amount of homes go pending since May, which has greatly reduced available inventory.“
Luxury homes in the suburbs are attracting buyers after having lagged the broader market for the past couple of years,4” Yun explains. “Single-family homes are continuing to outperform condominium units, suggesting a preference shift for a large home, including an extra room for a home office.”
The Importance of Pre-Approval
According to mortgage consultant Glen Bushmire “Freddie Mac reports the month of July brought the average U.S. mortgage rate to below three percent for the first time in decades worth of data, with the average rate for a 30-year fixed mortgage at 2.98 percent and the average 15-year rate at 2.48 percent.”
“Before you step out into this low-rate, fast-paced market, make sure you have a pre-approval at your fingertips, says Bushmire. “If you come across something you love, you’ll want to be ready to make a move.”
Whether you are thinking of buying or selling your home at Lake Tahoe and Truckee, I am an expert negotiator and love helping my clients achieve their dreams. Many clients are taking this opportunity to move up in this market, They are selling their current residence for something with more space.
Contact me today for a free property analysis or for a list of available homes for sale.