We Tell it Like It Is

With all of the low-priced foreclosures & short sales this year, along w/the $8,000 tax credit, there have been a ton of properties that have had many buyers submitting offers on them at the same time. Here's how a situation like that is handled normally:

A home goes on the market & the seller's agent suspects there will be multiple offers submitted, based on the low price vs. good condition.

Side note: Oftentimes, sellers & their agents will purposely price a home low with the intention of getting many interested buyers to compete against each other for the home; bidding over the list price for it and ending up selling the home for $10,000+ more than the original price.

Most of the time, the seller's agent will establish a date that they will stop taking offers and advertise that date to the other agents when they see the listing online. So, buyers will have a certain amount of time to go and see the house and then submit an offer.

Legally, if there are other offers on the home, the seller's agent has to publically disclose that; preferably (as a courtesy) before a buyer goes to see the home. They DON'T have to disclose how many offers there are or how much the offers are for. Sometimes, they will tell me how many offers there are so far, but they will never tell me how much they are for.

So, what does it mean for you as a buyer if you are interested in seeing or submitting an offer on a home that already has one or more offers on it?

The object of the game is to submit an offer that is more desirable to the seller than the other offers that have been submitted. And, you only get one chance to impress them. The seller will only pick one offer to work with. They will not negotiate with all of you. Just one of you.

What makes an offer desirable to a seller? A buyer that wants to move in quickly (therefore, a closing date within 30-40 days) and a price that is close to what they are asking. If you are looking to get a discount on the list price, this is NOT the right situation for you!!

How do we know how much to offer if they won't tell us how much the other offers are for?

Its a total guess, unfortunately. You have to trust your agent and go with your gut instinct. Just know this: If there are more than 2 other offers that you are competing against, you will be wasting your own time, your agent's time and the sellers' time if you submit an offer for more than $5,000 under asking price. Period. In fact, I will normally always suggest to my buyers that when they are competing against 2+ offers, then the MINIMUM they should offer is the asking price. I am not recommending this because I am secretly working in cahoots w/the sellers or because my commission increases as the sales price increases (which it does, but that isn't what motivates me). Based on my past experience, the higher you offer, the more your chances will increase that you will get the house.

So, in conclusion, expect to offer at least the list price, if not above the list price if you are willing to pay more for the house. If you aren't willing to pay at least the list price for the house, if not more, then do not waste everyone's time!

1) Brooklyn Park/Brooklyn Center

PROs:  1950's ramblers, 1960's split levels. 3+ bedrms, 2+ bath, 1300+ sq. ft. Nice exteriors, newer roofs, updated electrical/furnace/mechanicals. FHA friendly**. Often just needs interior paint, new carpet or new appliances and a good scrubbing. Starting at $70,000. Many neighborhoods are clean, quiet with great neighbors. Biggest bang for your buck in the Twin Cities.

CONs:  The City of BP has a very strict policy in place. Before a home can be sold in BP, a city inspection must be completed. It is the seller and their agent's job to have this inspection ordered prior to the home going on the market. However, the city has been behind this year on getting the inspections done and have been telling sellers to go ahead and put the house on the market before the inspection.

The BP city inspectors have a bad reputation of finding MANY code & safety violations during these inspections; some to the point of being ridiculous. They create a list of repairs that are needed in order to fix these violations and they give the list to the seller to complete. HOWEVER, if the property is a BANK OWNED FORECLOSURE, the bank refuses to make the repairs and will pawn it off on the future buyer instead. There is NO negotiating this.

The buyer can review the list to see what repairs need to be made. If their offer is accepted and they agree to take those repairs on, they must have a licensed contractor go out to the house and give an estimate in writing as to how much they believe it will cost to have the repairs made.  Then, the buyer must escrow 1.5 times the estimated amount in a holding account until the sale closes and the repairs are made. The buyer CANNOT move into the home until the repairs are made.

The city will then come back to reinspect the repairs and give the "ok". After this is done, the money that was escrowed will be released back to the buyer.

So, its tricky when a buyer finds a foreclosed house that they like in BP that's for sale, but the inspection hasn't been done yet because the city is behind, so you have no idea what sort of repairs would need to be made and therefore aren't sure if you want to submit an offer on the house.

If this whole thing sounds like a mess, it definitely is compared to buying a home in other cities. Our clients that have gone through this will tell you it was hell, however, now they have an awesome home that's solid with mortgage payments that are super low.

Another "CON" about buying a home in BP/BC is that home values will remain low in these cities for a long time. These areas hold the highest population of foreclosures; so far in 2009, about 1200 homes have sold in BP alone and the average sales price in BP is $146,000. It will be a long time until property values will see an increase in these areas.

One final "CON" about BP/BC is that every home buyer seems to know this is the place to get a cheap house. If you show up to a new listing on the first or second day, you will see the vultures flocking! Its a race right now and anyone that takes a moment to blink will lose out. I've found that an average home in BP/BC listed for under $150,000 will have anywhere from 4-25 offers after just a few days on the market right now. These homes are selling for up to $25,000 over the list price, so the buyer must be prepared to offer full price at the VERY LEAST on these homes. The BP/BC market is highly competitive right now.