Greg Millikan has represented more than 200 buyers in residential real estate transactions over the last five years in Bend.
Describe the real estate market for a buyer right now.
“It’s tough to be a buyer right now,” has become a standard response to questions about the real estate market in Bend. Low supply and competition—and now, rising interest rates—can add more layers of stress to an already major decision to purchase a home.
In the midst of the intensity of the market, it’s important to keep in mind that while multiple offers and price escalations are the norm, each situation is different and each property is unique, and we are now starting to see an uptick of both inventory and price reductions.
We’ll cover some tips and strategies for navigating this market, including when—and how strongly—to apply these strategies as you create an offer that depends on your situation.
What makes an offer stand out?
Typically, sellers are most interested in seeing the price and financing terms in an offer as well as contingencies for an inspection and appraisal. Price matters most, but isn’t the only factor.
For example, a seller may have specific needs about possession dates. When a homeowner is deciding between multiple offers, the main questions they ask are:
- Which buyer is most likely to close and complete the transaction?
- Will the closing price be the same as the offer price?
- Does this work for my timeline?
Cash offers are appealing because a loan application doesn’t influence the outcome. A higher down payment is similarly appealing because there is a perception that the loan application process will go more smoothly. This is why working with a local, trusted lender can make a difference, as their pre-approval letter might be perceived as more dependable.
In addition to financing terms, a seller is concerned about buyer contingencies included in the offer. Multiple time periods for a buyer to due diligence on the property and protect them if they discover an issue and want to negotiate or terminate are built into the standard language of a sales agreement.
What if you’re a buyer without a large down payment or a full-cash offer?
Despite what it may feel like, not every listing is highly competitive and receiving cash offers. Not every offer that is accepted hinges on price and financing terms. However, if you do make an offer that isn’t accepted, keep in mind it’s the market, not you. The seller would likely have happily accepted your offer if it was the only one they received and offered. Keep in mind the same terms you offered might be enough to appeal to your next seller. And, depending on your situation, there may be other terms you can consider offering to a seller.
What other terms make offers appealing to sellers?
In short, it’s all about the extent you as a buyer are willing to mitigate the risk that usually falls on the shoulders of the seller.
Even with an amazing offer price and high earnest money amount, a savvy seller knows there are multiple contingencies in a contract that allow the buyer to continue price negotiations and even terminate the contract and receive a refund for their earnest money.
While I don’t recommend waiving contingencies, there are options to modify the standard language in a contract to communicate to the seller that choosing your offer will reduce their risk. For example, you may be comfortable modifying the inspection contingency to make it clear to the seller that although there will be an inspection, you won’t request repairs below a certain dollar amount, or negotiate only if there are safety and structural issues, or might not request repairs at all. Or, with the appraisal contingency, you can commit to close at your offer price as long as the appraised value of the home is within a specified range, typically at or below the list price if you have offered more.
What about including a personal letter to the seller with my offer?
In an effort to ensure fair housing practices, Oregon was the first state to ban “love letters” last year through the passing of House Bill 2550. However, a federal judge recently granted a preliminary injunction from enforcing the new law which took effect in January.
Although writing personal letters to sellers was a long-standing practice, and seen as a way for first-time buyers to compete with wealthier ones, it was falling out of favor well before the state law passed. As real estate professionals have become more aware of discriminatory housing practices and worked to prohibit them, not only is the “love letter” discouraged, but many sellers refuse to accept them.
Mine was one of multiple offers. How do I know what the offers are?
The most challenging aspect of multiple offers for a buyer is how little information is available about the other offers. A good buyer agent will try to learn as much as they can about the needs of the seller and other offer terms, but a seller’s agent can only disclose information they’ve been authorized to share. And, it’s typically in a seller’s best interest to limit information.
Although we can look at historical data of similar properties to project how high other offers might be, each situation has its own influencing factors. So, in the end it can feel like you are “flying blind” and it is going to be a process of determining how much you are willing to pay, how much risk you are willing to take and which of the various offer strategies you are going to employ.
While difficult to quantify, it is a process of finding that threshold of how much you will pay to get the property—and what you won’t pay and not get the property—so there is a sense of peace with either outcome. Some buyers feel pressured to cross that threshold and end up having their offer accepted only to regret it. Other buyers stop short of the line and in hindsight, realize they would have been comfortable making a stronger offer.
What is your number one piece of advice to buyers right now?
Work closely with your agent to see homes early and identify the right mix of strategies to put together your best offer. There are more strategies and specifics than we discussed above, but in the end, we can only control what we can control. Everyone’s experience is different, but it is common to lose out on a few multiple offer situations before having your offer accepted. If this happens, be patient with yourself and as positive about the process as possible.Trying to buy a house right now can be stressful, and at times discouraging, but in my experience, perseverance will pay off.
—Greg
