It’s a Buyer’s and a Seller’s Market

Right now it’s a buyer’s and a seller’s market. How can it be both? It’s these low interest rates.

Low rates allow more people to qualify for loans, bringing renters into the home-buying market. Low rates also make it easier for homeowners who want to upgrade to afford more expensive homes. On a typical $300,000 home sale, an interest rate increase of only 2 percent could mean as much as a 25 percent increase in your monthly mortgage payment, so people are getting while the getting’s good.

Of course, this is the reason it’s also a seller’s market. Buyers have been buying everything in sight, so there are fewer homes to choose from, making each one a little more valuable.

With fewer homes for sale, many people are faced with multiple offers on the same property—complicating things for all involved. Realtors must review each offer, explain the pros and cons, and sometimes compare apples to oranges: for example, one offer may have a higher price tag, but request that the seller make concessions (pay some closing costs, make repairs or perhaps leave personal property with the house), while another offer may ask for none of those concessions but come in at a lower price.

A common dilemma for sellers today is choosing between an offer with a high price tag—but one that requires maximum financing that a buyer may not be able to obtain—versus offers with lower price tags but more security, like a financed offer with 25 percent down or even an all-cash offer.

The question is: how much is the certainty of an all-cash offer worth? On a $300,000 purchase offer, would you take $100 less for an all-cash offer? Certainly. Would you take $25,000 less? Probably not. You and your Realtor need to discuss the upsides and downsides to figure out where you draw the line.

Let’s say you have three offers: one for $310,000, one for $300,000, and one for $298,000. The first offer asks the seller to pay $7,000 in closing costs. The second offer is a conventional loan with 20 percent down, and the third offer is an all-cash offer, but the prospective buyers want a super short, two-week escrow.

In years past, buyers used to send a letter with their offer, sometimes including a photo of their kids, the dog, and Goldy the goldfish, letting the sellers know how much they’ll love and care for this house. Now, no one is allowed to provide information that could allow sellers to discriminate, which means people cannot provide much, if any, information.

On each of the offers above, you have three choices: you can accept the offer as presented, you can reject it outright, or you can respond with a counter-offer. With a good Realtor on your side, you can respond to all offers at once, countering various issues in each of the offers, without inadvertently selling your house to three different buyers simultaneously—no one appreciates that. Or, you can simply ask for higher prices from each prospective buyer, taking into consideration their special requests and what those requests are worth to you.

Be sure your Realtor understands and complies with the special, and somewhat confusing, rules around multiple counter offers. Ask your Realtor whether they’ve done this before, because these transactions can be tricky. Inexperienced Realtors can always get assistance from their brokers or mentor Realtors—just be sure they do.

As a seller, multiple offers and counter offers provide some confusion and hoop jumping, but from a negotiating standpoint, it’s a wonderful place to be. As a buyer, multiple offers add more tension to an already tense process, but don’t be dissuaded. Hang in there. Your offer may be just what the seller is looking for.

If you have questions about real estate or property management, please contact me at rselzer@selzerrealty.com or visit www.realtyworldselzer.com. If I use your suggestion in a column, I’ll send you’re a $5.00 gift card to Schat’s Bakery. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 35 years.