We're in a very strong seller's market here in Calgary! The past few months have been frustrating to many hopeful home buyers. There are too few homes available, and the good ones are snapped up in a hurry! There are usually 6000 + resale homes on the market at any time. As of January 1st, 2006 there were 900 homes for sale.
Recently I heard of a case in Silver Springs where the sellers received 33 offers on their home in 4 days! What chance do you have to buy a really nice home in a market like this?
. Here's what I've learned about how to succeed in this kind of market. I call these rules "The Seven Seller's Market Strategies!"
RULE #1 - PRE-APPROVAL
Do you want to get the best house you can for the least amount of money? Then make sure you are in the strongest negotiating position possible. You see, price is only one bargaining chip in the negotiations, and not necessarily the most important one. Often other terms, such as the strength of the buyer or sale of their existing home are conditions critical to a seller.
In years past, it has been recommended that buyers get "pre-qualified" by a lender. This means that you spend a few minutes on the phone with a lender who asks you a few questions. Based on the answers, the lender pronounces you "pre-qualified" and issues a certificate that you can show to a seller.
Sellers are now aware that such certificates are WORTHLESS, and here's why! None of the information has been verified! Oftentimes unknown problems surface! Some of the problems I've seen include recorded judgments, child support payments due, glitches on the credit report due to any number of reasons both accurately and inaccurately, down payments that have not been in the clients' bank account long enough, etc.
So the way to make a strong offer today is to get "pre-approved". This happens AFTER all information has been checked and verified. You are actually APPROVED for the loan, the only loose end is the appraisal on the property you want to buy. This speeds up the process considerably and may give you the competitive edge.. Now it's like having cash to take to the seller! In a situation where the sellers have several offers to choose from, they will choose the offer from a buyer that's PRE-APPROVED.
RULE #2 - BETTER THAN DAILY SEARCH
When you first start looking, it's possible that there will be nothing available that you like. So then what? Your agent should then begin hunting for you and watching for new listings that match what you're looking for. Your agent should be checking at least once a day and preferably more often.
There have been cases recently where a house was listed on MLS and received an offer before MLS had time to put the listing online. See if your realtor has a computer program that alerts him or her whenever there is a new house on the market that meets your requirements. They can fax, email, or call you immediately with the information. You'll be there before other buyers even know about it!
RULE #3 - SUPER SPEED
As soon as a listing hits the market, it becomes a race. Who can get there the fastest? In this market, you need to be prepared to drop everything, leave work, or do whatever it takes to go see a property. It sounds extreme, but I'm very serious about this. Time is of the essence. Don't think that you'll take a look at it this weekend. It could be sold by tonight.
And be prepared to make an offer on the spot. That means bring your chequebook and be mentally ready to make a decision. Some realtors are now printing up offers when they visit a home and filling out the amount in the car. Offers can come in minutes apart. The fastest buyer wins out.
RULE #4 - NO COUNTER OFFER
When we make an offer, we'll make it with the intention that the seller will accept it. We don't want to get a counter if at all possible. If the seller counters us, then there's a very good chance another offer will come in before we can accept the counter.
For this reason, we try to make the offer as palatable as possible so the seller can accept it right away. This means we give the sellers their choice of services, avoid all contingencies, and steer clear of any terms or conditions out of the ordinary. I used to think that by trying to get "a little extra" out of the sellers for my clients, I was doing a good job for them. And in the past, that idea worked. But try that now and you lose the house altogether.
At first I struggled with this, and I felt that by giving the seller everything they were asking for, I wasn't being a very good negotiator for my buyers. But I got over it. Doing a great negotiation and losing the house isn't good service. Telling the truth about what it takes to win in this market is the kind of service you want.
RULE #5 - THE PRICE
Better sit down for this one. The asking price used to be the price the seller hoped to get, and the one that offered closest to that price bought the house. That's no longer true. Now the asking price is the MINIMUM price, the base price to begin making offers. It's the minimum bid if you will, the starting price at the auction. Make no mistake, for a hot property in a hot location, there will be multiple offers, and they will be more than the asking price.
RULE #6 - BEST OFFER
Buyers have lost a property by offering less than the asking price. The sellers accepted the other buyer's offer over yours, even though they were both for the same price. Why, you ask? Because the other buyer's offer was higher than ours originally.
Now I know that this makes no sense. The bottom line is the same, so why does it matter whose offer was better originally? I'm not a psychologist but I know that it works.
RULE #7 - THE BIG PICTURE
Now I know that all this sounds like we're rolling over and playing dead for the seller. We're giving them everything they want, and then more. But we'll have the last laugh. We'll be laughing because we bought a great house in a rising market, beating out the other buyers! Is it really a big deal to pay a couple thousand more when the house will be worth 20 or 30 thousand more next year?
The Calgary market is appreciating at anywhere from 10% a year right now. That means that if you don't buy the house and it takes you a month to find another one, the price will be a few thousand higher anyway. So are you really paying too much? It's all in how you frame it in your mind. Don't think you're losing when you pay over the asking price, you're actually winning. Next year you'll look back and say what a genius you were for making such a smart move.
David Cooke is a senior mortgage consultant living in Calgary,Alberta. You can get more information by visiting his website at: http://mortgagealliance.ca/davidcooke