Bidding Wars Return

When I ran this morning, it was 29 degrees, with wind chill that made it feel like 17 degrees, so it didn't seem like the first day of spring, but it is!  And with spring comes the spring real estate market, which we are definitely seeing.  The surest sign of an improving sales environment is to have a listing come on and receive multiple offers right away, and that's happening.  Although we don't yet have the shortage of supply that other markets do, it's true that most of what is selling has just come on the MLS, and is garnering attention immediately.

Buyers have been coming in close to asking price on properties correctly priced to sell.  In more cases than we've seen in a long time, several parties have come in at once, leading to situations where buyers have been asked to produce a "highest and best" offer.  Just to be clear, that does include price, but it also considers terms, so offers that are cash, or that don't have inspection clauses, are usually favored over offers with contingencies.  We realize that buyers often doubt the veracity of real estate agents who say that they have another offer, so I'm using this forum to make sure that everyone knows that it is indeed happening often these days.  While there may indeed be cases where an agent claims to have another offer coming in to raise or accelerate a bid, it is true that, even with properties that may have been languishing for months, there are instances of multiple bids.

What does this mean for sellers?  First of all, it doesn't mean that you underpriced your property.  Things priced to sell quickly go for more than those set higher, even though that may seem counter-intuitive.  Buyers go higher when they perceive that the price is attractive, because buyers today are well-informed, and they know what properties are worth.  Also, since mortgages require appraisals and appraisals depend upon comparable sales sold recently, rising prices mean difficult appraisal situations, since appraisers can only use closed properties as comparables, and those contracts are already several months old when they close.  So, you can hold out for more money, but your buyers may not get a mortgage for the higher amount.

And what does it mean for buyers?  You'd better get out there soon...and don't fool around.  Offer what you would be sorry to hear that someone else bought it for, and do it quickly.  Make your offer as clean as possible, and don't ask for contingencies you don't need.  You'll never borrow again at rates this low, so be happy and buy now!

Mortgage Woes

There has been a lot of talk about how low mortgage rates are today--the lowest in memory--but much less talk about how hard they are to get approved.  We have found that buyers may wait for weeks with promises of commitment, only to be told after a long period of time that they are being denied.  The annoying part--actually, make that one annoying part--is that the denial is frequently for something that you would have thought that the bank had known all along.  This is true of delays as well.  We have had closings delayed multiple times, with some delays being for things that should have been settled well in advance. 

I suspect that some of the problem lies in confusion at the banks, and probably understaffing.  The bigger issue may be that no one has the authority to pull the trigger on anything, so things have to wend their way up a ladder of approvals.  Just to be clear, all of the blame does not belong with the banks.  Governmental changes in policy have caused all kinds of changes, and sometimes at the last minute.  The feds are always trying to protect us against the last problem, so many of the rules seem largely unnecessary.  This is one of the situations where we can groan when we hear that "we're from the government, and we're here to help you."

Buyers can contribute to the delays also.  Anyone who has gotten a loan in prior years may be amazed at how much information is demanded on today's applications.  Some people waste time trying to argue their way out of requirements.  Since most are imposed on the banks, as opposed to by the banks, this is a delay not worth taking.  The one I hear frequently is this:  "I don't need to get a loan.  I could pay cash.  If they just look at my bank balance, they won't ask for all this paperwork."  Not true.  Get over it, or go ahead and pay cash.

The statistics from the CT Multiple Listing Service show closing times of around 60 days.  That's not so far from the 30 to 45 days of the past, but should be noted, especially as almost 40% of sales are for cash these days, and therefore have no delays.  The time frames may get worse as we near the holiday season, so plan ahead to avoid disappointment.