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Buying in a Very Competitive Market

Home Mortgages and Home Buying Buying in a Very Competitive Market

  • ENT Doc ENT Doc 
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    Joined: 01/14/2017

    Just went into contract on a home in a very competitive market.  This experience was hardening, but I learned a lot.  I wanted to share my perspective/pointers and see if anyone else had any other useful tips for the thread.  Take it as a given that one is purchasing when they are good and ready (not a resident/fellow, have lived in the area, know the group well, etc.).  Also, it is assumed that you have prioritized what is important to you in a home/area, which would be the case in any purchase, competitive or not.  Long post.  Read if you like Tolstoy.

    1.  Research realtors and find one who is responsive and/or who has a team around them who can be.  Make sure they have been around a while, are respected (as best you can find this out) and move a lot of inventory – compare homes sold over a year in that specific area you want.  Everyone talks a good game.  Numbers don’t lie.  Good numbers speak to being in the know, being aggressive, being responsive, sending notifications about upcoming sales, etc.  Find a good investment company.

    2.  Do your own research and start early.  Use the initial conversations with the realtor to help guide what to look into (upcoming development, new levies, market dynamics, etc.), but do your own research and make your own phone calls.  Ask them for regular updates on closings that month.  Compile a spreadsheet of these over the months that follow (we started a year out), which will give you both intimate knowledge of the types of homes but how fast they move and what makes them move at what price.  I found my realtor, despite her experience, would spit-ball numbers and trends that I knew not to be true based on my own research.  Know the market history.

    3.  Be flexible/creative.  We ended up getting the kind of home we initially wanted, but more possibilities opened up when we looked into smaller homes (uncomfortably small) in nice areas that we could grow into financially and add on later.  Change your asset allocation.

    4.  Be available.  You’ll struggle to buy a home in a competitive market if flying in on random weekends and aren’t there regularly.  Homes will come up and get multiple offers within a few days, but if you’re not there you can’t bid.  And this may lead you to make uncomfortable sacrifices.  Get in early and often.

    5.  Inspect the home and ignore the staging.  Look for things an inspector might look for.  Don’t take the guided tour during some open house.  Schedule an appointment and take your time picking the place apart.  We focused on a) what is going to hurt us financially in the short term, or b) up-end the contract because of inspection remedies.  You have a free inspection at your appointment.  Most people probably look at the nice countertops and stand there starry-eyed pretending little Johnny is frolicking around the nice back yard.  What a wasted opportunity.  Read the disclosures, inspect any potential problem areas noted on that.  Bring a friend/family member with you who might know something more about inspection related items.  Bring a socket tester to test for grounding.  Take pictures or videos so you can remember/review later.  If it’s a home you think you really like pay an inspector some money to come out with you to give you some pointers.  Abandon all emotion.

    7.  Have wise people to confide in.  We are blessed to still have our parents with us.  Our fathers were invaluable in offering guidance on things we took pictures of or had questions about.  I’ve lived in several homes and have owned homes before, but the wisdom of someone who has lived in the same place for 30+ years is like gold.  It also brings you down from any emotional high and keeps you grounded to the facts and sane decision-making.  Have good advisors.

    8.  Make an aggressive offer based on good information, not emotion.  Reasonable places would easily go in a few days where we looked.  We had torn the place apart with our inspection/showing and had sent pictures to an inspector we knew who was able to tell us whether or not things were serious issues.  The home didn’t appear to have any major deficiencies from what anyone could tell, and we knew exactly where the minor deficiencies were that would need to be addressed in the short/medium term.  We knew what was a reasonable price for the home and were willing to escalate to that reasonable level but no more.  We knew the home was worth this price at the very least based on our own analysis, so we were willing to waive the appraisal contingency.  We were willing to “self-insure” for any inspection-related items, or back away completely and eat the inspection fee if we missed something glaring, so we removed the inspection remedy contingency.  The lifting of contingencies made the offer (more than asking but not a lot more) much more attractive and scared off other buyers.  In short, our superior information (or so I’d like to think) allowed us to make an aggressive offer that we were comfortable with but that scared off other people.  Inspection came up pretty clean for the age/size of the home.

    9.  Be.  Patient.  Don’t freak out and get emotional if you lose a home.  We lost one that was “perfect” (it wasn’t).  It was the best thing that happened to us, because it forced us to think creatively (which opened up other possibilities).  When you lose a home it’s easy to stray from your plan.  Stay the course.  Slow and steady wins the race.

    10.  Beware of dual agency with other buyers.  If you go into contract on a home with dual agents involved in a competitive market can destroy your deal.  Agency disclosure, code of ethics, right and wrong – phooey.  That stuff goes out the window with some folks, especially in a competitive market.  If you go into contract it’s worth asking if the seller’s agent represented any other bidders/buyers.  Wasn’t the case with us, but this happened to someone I know.  Pissed off buyer represented by the seller’s agent who lost out kept prodding the realtor, found out what offer won, told the realtor they’d beat the offer if the seller just didn’t respond to the inspection remedy request, which voids the contract.  Pissed off buyer then swooped in and got it.  Aside from you or the bank not doing your stuff on time, the inspection remedy contingency is one of the few things the seller can still do to upend your deal.  Not responding is worse than countering, because it voids the contract.  By removing this contingency we not only gave a stronger offer but removed this as a possibility.  As is the case with finance, bad actors exist in real estate.  Bad incentives make for bad actors.  Kill the potential for bad incentives, or at least know that they exist so you can keep your eye on it.

    11.  Follow up on all deadlines and ask for confirmation of receipt in writing.  Realtors aren’t known for their diligence.  Don’t let their stupid mistake upend your home purchase.

    Phew.  Happy to hear any other thoughts.

    CordMcNally CordMcNally 
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    I’m glad things worked out well for you. Solid list you’ve compiled. I will say, house hunting can be fun and exciting but it can also be hell, too.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #216057 Reply
    ACN ACN 
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    Joined: 01/08/2016

    We just bought a house in a warm market in a LCOL area. We didn’t use a Realtor at all until we found the house we wanted and then used the sellers realtor. I can zillow, find comps, and look at new listings just as easy as the realtor.

    My brother is buying a house in a MCOL area in the midwest with a hot hot market. Basically, open house Saturday, place your bids, contract signed Sunday. They’ve been offering $10-20k above ask and have no house yet. The price range of $200-500k is selling fast.

    If you're ever having a bad day, just remember in 1976 Ronald Wayne sold his 10% stake in Apple for $2,300.

    #216059 Reply
    Liked by Zaphod
    wonka31 wonka31 
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    Pretty solid advice. We also bought in a competitive market a few years back. The best part of our realtor was that he would get us into a house that day, based on our schedule. I looked at the house I currently live in at 8:30pm. As far as realtors in a competitive market go, their ability to get you to see a house fast is their best asset, in my opinion. In a competitive market, negotiations, closings are all kind of status quo.

    #216060 Reply
    Liked by Zaphod
    ENT Doc ENT Doc 
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    We just bought a house in a warm market in a LCOL area. We didn’t use a Realtor at all until we found the house we wanted and then used the sellers realtor. I can zillow, find comps, and look at new listings just as easy as the realtor.

    My brother is buying a house in a MCOL area in the midwest with a hot hot market. Basically, open house Saturday, place your bids, contract signed Sunday. They’ve been offering $10-20k above ask and have no house yet. The price range of $200-500k is selling fast.

    Click to expand…

    It’s only a matter of time before realtors go the way of the Dodo.  Very little value add to the whole process.  Will be interesting to see what happens as more companies start buying inventory from sellers.  I will never use a realtor to sell our home ever again.  I can take pictures, post to the MLS/Zillow, show the home, hire an attorney and find a title company.  If the buyer has an agent I sure hope they haven’t signed anything, because the fee is coming out of their end.  Insanity to pay a fixed percentage of your home value for the same amount of (little) work, regardless of home price.

    Sounds like your brother and I were in similar markets.  Best of luck to him.

    Avatar snowcanyon 
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    Status: Physician
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    Joined: 10/22/2018

    We just bought a house in a warm market in a LCOL area. We didn’t use a Realtor at all until we found the house we wanted and then used the sellers realtor. I can zillow, find comps, and look at new listings just as easy as the realtor.

    My brother is buying a house in a MCOL area in the midwest with a hot hot market. Basically, open house Saturday, place your bids, contract signed Sunday. They’ve been offering $10-20k above ask and have no house yet. The price range of $200-500k is selling fast.

    Click to expand…

    It’s only a matter of time before realtors go the way of the Dodo.  Very little value add to the whole process.  Will be interesting to see what happens as more companies start buying inventory from sellers.  I will never use a realtor to sell our home ever again.  I can take pictures, post to the MLS/Zillow, show the home, hire an attorney and find a title company.  If the buyer has an agent I sure hope they haven’t signed anything, because the fee is coming out of their end.  Insanity to pay a fixed percentage of your home value for the same amount of (little) work, regardless of home price.

    Sounds like your brother and I were in similar markets.  Best of luck to him.

    Click to expand…

    Yeah, I don’t get the Realtor thing; I feel like they should already have gone the way of the travel agent. Maybe this lawsuit will hasten their demise: https://www.forbes.com/sites/alyyale/2019/05/21/realtor-group-moves-to-dismiss-class-action-lawsuit-alleging-collusion/#6a1f927c2d75

    #216065 Reply
    Liked by Lordosis, ENT Doc
    Avatar AR 
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    It’s only a matter of time before realtors go the way of the Dodo.  Very little value add to the whole process.  Will be interesting to see what happens as more companies start buying inventory from sellers.  I will never use a realtor to sell our home ever again.  I can take pictures, post to the MLS/Zillow, show the home, hire an attorney and find a title company.  If the buyer has an agent I sure hope they haven’t signed anything, because the fee is coming out of their end.  Insanity to pay a fixed percentage of your home value for the same amount of (little) work, regardless of home price.

    Click to expand…

    Is there anyone here who has done this who can describe their first hand experience.  It seems so easy, that I figure I should have come across someone who has done it, but I haven’t yet.

    I’m planning to do the same, but it hopefully won’t be for a very long time (and maybe things will be different then).

    #216067 Reply
    Liked by MPMD
    Avatar G 
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    I can take pictures, post to the MLS/Zillow, show the home, hire an attorney and find a title company.

    Click to expand…

    I dunno, E…I’d pay A LOT not to deal with any of that!

    #216081 Reply
    Liked by Jmbean50
    Avatar Tim 
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    By no means am I defending realtors, or at least the fixed % commission structure.
    But, they can facilitate and make huge differences.
    1) Both listing and selling agents tend to specialize. They tend to have networks. As you mentioned, open houses tend to be events for other realtors. Your listing agent can attract 50 selling agents that each have multiple serious buyers. If you are in the market, your selling agent might get you in for a showing before a sign or listing goes up. The net is much much wider.
    2) Buyer and seller face to face can create a whole different set of dynamics. Questions or comments alone can create friction that torpedoes a reasonable sale. It’s helpful to have the owner out of the way when doing a head to toe walk through. “Would we put in wood flooring? This tile or carpet is really tacky.”
    3) Many deals fall through near or at the closing that can be salvaged. Sometimes an experienced realtor can easily find a solution and save the deal.
    4) If your realtor knows your preferences well, two or three options may pop up that you would miss. Just as OP lost out and adjusted, one that really knows that options in an area, can steer you to nooks and crannies you weren’t aware of before.

    Of course a “door opener/tour guide” isn’t worth it by any means.

    #216082 Reply
    Liked by Infinity
    Avatar snowcanyon 
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    I bought a FSBO. Pretty easy, although it did take longer to negotiate a few things. In my state people don’t usually involve an attorney, and the title company was really helpful. Would consider selling FSBO, but def more work on that end than as a buyer.

    #216096 Reply
    Liked by Tim
    Zaphod Zaphod 
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    The real problem with fsbo or no realtor is simply timing. When we sold our house a couple of months ago we were having 3-5 showings every day, plus an open house, etc…it was nuts and even though I was hardly working preparing for the transition, it would be super difficult to schedule things otherwise and you dont want to miss showings.

    Otherwise agree, little to no value add, egregious % fee.

    #216120 Reply
    Avatar Scarftheverb 
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    I have mixed feelings about realtors. It hurts to see their cut on the contract, but there are several successful realtors on my street and those guys work hard, have great interpersonal skills and huge funds of knowledge on the process and the local markets. The fixed percentage (especially on a 7 figure house) is probably over the top, but they do add some value for a lazy person like myself. What really gets me is the title insurance—has anyone ever heard of a title dispute in a suburban developed neighborhood? That industry must spend a lot on lobbying and kickbacks to the lenders.

    #216139 Reply
    Liked by Zaphod, Tim
    ENT Doc ENT Doc 
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    I have mixed feelings about realtors. It hurts to see their cut on the contract, but there are several successful realtors on my street and those guys work hard, have great interpersonal skills and huge funds of knowledge on the process and the local markets. The fixed percentage (especially on a 7 figure house) is probably over the top, but they do add some value for a lazy person like myself. What really gets me is the title insurance—has anyone ever heard of a title dispute in a suburban developed neighborhood? That industry must spend a lot on lobbying and kickbacks to the lenders.

    Click to expand…

    I asked this question of a title company recently.  In 20 years the lady had heard of or seen one dispute.  Ridiculous.

    #216140 Reply
    Avatar Scarftheverb 
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    I find myself fantasizing about buying a house in cash and sticking it to the man by dramatically refusing to buy title insurance. I’m sure it will never actually happen, and if it did no one but me would care.

    #216141 Reply
    Lordosis Lordosis 
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    If I knew then what I know now I would not use a realtor.  They are not really very helpful because they just want to get you in a house.  It takes a lot of effort to know yourself what you are looking for and to convey that to another person is very hard.  If we ever buy another house I can easily look on my own.  Then use the lack of a realtor to negotiate a lower price.

    Selling a home it really depends on the situation.  In an ideal world I will be in the same area and not too busy to do it myself.  However I can see utility in paying someone to show the home if you are out of area or too busy to do it well yourself.

     

    Enjoy the new house!  Moving is a lot of work and is expensive but parts of it are fun.

    “Never let your sense of morals prevent you from doing what is right.”

    #216146 Reply

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