As 2020 ends, more people than ever got a new home for Christmas. It was a crazy year in so many ways, it is hard to focus on a sole sector, but housing deserves special attention because of its massive impact on the U.S. Economy and local communities.
Caught mostly by surprise, the real estate industry faced the perfect storm in 2020: The lowest interest rates in U.S. History, an oversupply of prospective buyers and an undersupply of inventory and going into 2021 it may look similar.
If this trend continues, the home buyer in 2021 will be faced with the challenge of dealing with multiple offers as they try to get into the housing market or move around within it. Although multiple offers are not a new phenomenon, it is far from typical.
Today we offer a crash course for home buyers in 2021 as they likely will have to compete for the house they want. Locally, it was not totally unusual for real estate agents to receive five or more offers within days of coming on the market. While this is a very frustrating situation for prospective buyers, a few tactics might be useful.
First, let us look at what the seller and seller’s agent are experiencing. By law, a seller’s agent must submit all offers to their client “without delay” and most agents, develop a “net to the seller” sheet to accompany each of them. Although the seller is free to accept any offer regardless of the offering price, it is a violation of federal fair housing laws to discriminate based on the seven protected categories, aside from being morally wrong to do so.
Any discussion between buyers, sellers, agents, brokers, lenders and others in the transaction that speaks to the protected categories, while it may seem innocuous, may potentially be a violation of Federal Fair Housing laws and subject to a $21,039 penalty, if convicted.
These words, when asked outside of the terms/conditions of the transaction, are an alarm signal when a seller’s agent asks them of a buyer’s agent, “tell me a little more about your buyer.”
Unlike in the residential rental business, which considers applications on a “first come, first serve basis, residential sales agents that receive or anticipate receiving multiple offers, typically use a “multiple offer disclosure form” that notifies all offerors of a date and time the seller will consider all offers currently on the table, so long as the seller agrees with this process. At the prescribed time, the seller may accept, reject or select one of the offers to further negotiate with.
Here are five ways for buyers to get a leg up in a multiple- offer market.
• Have a valid preapproval or “proof of funds” letter ready to submit with your offer.
• Be prepared to make a strong earnest money deposit with your offer.
• Make your best offer, it may be your only chance.
• Other than home inspection and financing, avoid other contingencies, if possible.
• Buyers paying their own closing costs may have a stronger chance.
In closing, every transaction is different, and it is highly recommended buyers and sellers rely on real estate agents for advice and counsel.
Virtually every real estate agent in Hardin County is a member of The National Association of Realtors and subscribes to a code of ethics and a commitment to remain fair in all dealings. There are at least fifty steps in the process of getting to the closing table and most agents have done it hundreds of times. You can depend on them.
T.W. Shortt is past president of Heart of Kentucky Association of Realtors and broker with Realty World Knox Realty Group LLC.