It’s only February but Spring has already arrived. And, the Denver real estate market is already sizzling with many multiple offers on properties as soon as they hit the market. It’s not happening in all segments of the real estate market. But, competition to buy home is stiff for homes in some areas and most lower priced homes.
Even the weather is spring-like early. This may be the hottest February in Denver history. Temperatures are routinely in the 60’s, 70’s and even 83 degrees. Yes, it doesn’t feel like February. It’s Spring!
The Hottest Real Estate Markets
Now, granted this frenzy of real estate activity including multiple offers is isolated to some parts of the metro area and some price ranges. Generally, homes priced lower and closer into the city center are the most popular. Some receive multiple offers from anxious buyers within hours of hitting the multiple listing service. Home priced under $500,000 and in or near Denver are the most likely to receive multiple offers.
Why is this happening? Interest rates have begun to rise somewhat. But, the clouds are gathering. First time home buyers, people who have to move, investors and developers are all scrambling to “Buy Now”. Everyone believes properties will be less affordable and have higher mortgage payments when the interest continue to rise.
In addition, there is a limited number of homes for sale. Seller’s are just less likely to list their homes for sale in this market. Home prices are increasing every year. Maybe, they are just holding onto a good investment.
For example, I have a good client looking for a new home who will not sell his current property. He intends to hold onto it as a rental. It will create more income than expense and rental homes are still hard to find in Denver.
How should buyers and sellers handle offers in a competitive environment? Here are some guidelines, tips and tricks.
How Buyers Compete With Multiple Offers
- Pick a good Realtor to represent you as a buyer’s agent. A good Realtor will be in touch with the listing broker to find out how many offers there are, how competitive they are and what the Seller really wants. Sometimes, it more than price. It might a possession date. Or, it could be a quick closing. Let your professional agent find out for you.
- Consider a higher offer or an escalation clause that automatically increases your offer against bona-fide competitive offers. Such a clause can have a limit at the top end or the right for you, the buyer, to approve the final escalated price.
- Consider waiving the lenders appraisal. Sellers like this because they then don’t have to worry about a low appraisal causing a renegotiation of price later. This sounds risky and it can be. Again, a good Realtor will advise on the true “value” of the property. Appraisers can be wrong. An appraiser’s mistake can cause friction in a transaction and even potentially a contract that never closes.
- Consider paying closing costs that the Seller would normally pay. In Denver, that would include the title insurance premium, HOA transfer fees and occasionally a transfer tax in special districts. Some buyers are now reported even offering to pay the Seller’s commission up to a certain amount. That’s clever because it has the effect of a higher offer above full price with less risk of a low appraisal.
- Consider wring the Seller a “love letter”. Explain how much you you appreciate the home and the care it has received. Tell about your family and how the home is perfect for them. Seller’s often want their home to go to a “deserving family”.
- Offer a flexible closing and/or possession date. Each situation is different. You Realtor can find out if a flexible time for closing or possession would be well-received by the Seller.
How Sellers Handle Multiple Offers
- Don’t take the best price offer right away. Sometimes, the offer that nets the Seller the highest price isn’t the best offer. Consider carefully the probability that the transaction will close. Obviously, a cash offer eliminates the issues of a buyer obtaining a mortgage. Offers are contingent upon loan approvals. So, cash is a big advantage in an offer.
- Consider asking the best offers to resubmit with their “highest and best” offer. Your Realtor can advise about how to do this carefully.
- Consider a counter-proposal asking the best offer for a little something extra. Sometimes that can be more money. Sometimes, it might be the Seller saying in the house for an extra amount of time or even the removal of some attached fixtures.
- Assess the likelihood that the transaction will close. Your Realtor can ask the buyers’ agents about the motivation and financial capacity of each potential buyer. Lender letters offer reasonable assurance that he mortgage is obtainable are necessary. But, a pre-approval of the buyer is even better. Even a cash offer needs to have liquid assets sufficient to close verified and documented.
- Rely on your agent. An experienced Realtor will talk in detail to each agent to find out what factors might be just the surface of each offer. Has each potential buyer been under a contract to buy previously? Why did that transaction terminate? There can be a variety of issues just under the surface of each offer. Trust your Broker to explore those issues
I hope the tips help you compete in this very busy segment of the Denver real estate market. Not all transactions involve competitive bidding. But, when they do, you really need the best agent to represent your interests. Choose your Realtor as carefully as you choose your home!