Expect 2013 to Look Similar to 2014
I had someone ask me the other day to sum up the 2013 San Carlos real estate market in just one word. Exhausting. It was the first word that popped into my head. Don’t get me wrong, I am thrilled for the advancement of our market but what we just went through, and are apparently headed back into for 2014, is a severely lopsided market where sellers are king. When the market is this lopsided it creates added stress for buyers. Purchasing a home is stressful enough. Add to that process the pressure of multiple offers and one-up pricing, and the result is many sleepless nights.
Breathe. As is the case with most real estate markets, things are not as bad or as good as they may seem. The purpose of this post is to give you an insiders view into how multiple offers really work in San Carlos. As with most things real estate related, the perception is far different than reality. My hope is that many of the frustrated buyers in San Carlos will feel a bit better after reading this post.
The All Cash Myth
Some of the new buyers I met with last year were scared to death because they confessed, almost in a hushed tone, that they did not have all cash. That’s how far we have come. If you assume the average price of a home in San Carlos is 1.3M, we now have buyers apologizing for not having that amount laying in an account somewhere to throw down on a three bedroom, two bath, 1500 square foot home.
REALITY>>>While we do have some all cash transactions in San Carlos, the vast majority are done with bank financing. I just went back and counted my San Carlos transactions from 2013, and out of the 40 I completed, only one was all cash. All cash is seen on a much larger scale in Palo Alto, Los Altos and Atherton.
Playing the Law of Averages
Multiple offers are the norm and should be expected with every offer you submit. Sound intimidating? Maybe, but consider this: If your agent tells you there are ten offers on a house, do not instantly assume the situation is hopeless and there is no chance of success. I will quickly try and calm down my buyers by telling them to rely on the law of averages. I have been through this enough times on the listing side to know what the law of averages looks like on a contested property. Of the ten prospective offers:
(1) Two or three of the offers will not stand a chance from the second they are handed over. Why? To be entirely direct, they will be a disaster of one form or another: Incorrect offer formation, missing signatures, non-compliance with the requests of the particular offer procedure, missing documents, etc. The incompetence will be completely obvious to the listing agent and the seller. These offers will be viewed as a hassle and a liability.
(2) Two or three of the ten offers will not be realistic on the true market price. Here’s a tip, if you are one of ten offers, do not expect to obtain the property at the list price or below the list price. These will be the groups of buyers that will be most surprised when they do not get the house. Trust me, it never fails.
(3) You will then have one offer which will have an incredibly bizarre term(s). In other words, there is no chance of any reasonable seller signing that particular offer.
So, just to recap, in a situation where you are one of ten offers, as long as you are prepared, realistic on price, are not asking for anything completely crazy through a strange term in your offer, you should expect that you are already in the top three or four offers. Feeling better about things? Good. Let’s press forward.
Try Not to Offend the Sellers
This portion of the post is somewhat tongue and cheek, but unfortunately, I wouldn’t be writing it if it didn’t happen. Let me first say that the majority of agents in San Carlos who present their offers are very well prepared and do an outstanding job, however, playing the law of averages from above, there will always be one that leaves the sellers and the listing agent scratching their head. With this in mind, please do not have your agent:
(1) show up an hour late for the presentation of your offer because he or she lost track of time.
(2) start the offer presentation off with a detailed description of the fight he just had with his wife.
(3) refer to one of the sellers as “toots”.
(4) refer to you as crazy for wanting to spend this much money on the sellers’ house, but he is just “doing his job” and presenting the offer.
(5) explain that if your offer is accepted and it turns out there is a problem with this house, you will not be afraid to sue, as you have done this with the sellers on your previous two home purchases.
Yes, all of those happened. I think you get the point…..let’s move on.
The Package Deal
In my opinion, this is what the multiple offer situation comes down to every time. When taken in totality, which buyer group represents the best option for the seller. Remember, the second a seller signs an offer, the tables turn and the buyer will then hold all of the cards. The seller is now completely reliant on the buyer performing as they have promised to do in their offer. So, you don’t need to be the highest offer, but you do need to be in the ball game. You don’t need to have the best terms, but you need to have your offer tailored to the situation of the seller. Finally, understand that everything you do, every interaction you have with regard to your prospective new home should be done around giving comfort to the seller that you are simply the best package deal.