Negotiating in this Market

I thought I’d take the easy way out and cut & paste a section out of my own Homebuyer’s Class for my post this week as I’m kind of busy with…real estate. When I looked at the section on Tips for Offering, I realized I think my own class document needs an update given the current state of the market! Here are a few things I realized I might like to address:

Love Letters- I’ve been writing these on behalf of my clients for many, many years, and have indeed won homes for my clients (been told) on the strength of the letters I wrote. I have never encouraged my clients to write their own letters as I believe it is a stronger position for me to advocate on their behalf. That said, my focus is always their strength as Buyers and whatever they bring to the table in terms of job stability, their actual love of the particular home/property (read: commitment), and other such things. I definitely do not use photos of the Buyers. There is a big debate going on around the issue of these letters (mainly the ones Buyers write about themselves), and it revolves around Fair Housing concerns. This has gotten to the point where they were outlawed for a time, and now that has been overturned and they are again allowed (as of this writing). NOTE: It is never OK to try to appeal to a perception of a Seller’s preference for race, gender, familial status or other protected class positions. Never. So, if you’re ever in the position of deciding whether to deliver such a letter, please keep this in mind, and consult with me! Or your Realtor ; )

Lower Offers (and how best to make them)- Well… this one is just nearly N/A in the current market. I say “nearly” as it does happen, but usually not at the outset unless a property has been sitting on the market for what is considered a longer period of time or if it was priced too high to begin with (which is usually why a property is still on the market). It *can* happen that the price goes down after certain things are revealed in the inspection process to compensate, but most properties are selling above their asking price, & often well above.

How to Win- It has been the case for awhile that multiple offers have driven prices up significantly over asking, and/but we think we are seeing a teensy bit of pullback in at least the amount of overage. This is more due to Buyers backing off than to more properties entering the market as we still see record-low Inventory. The way this has been playing out in a “multiple” bidding situation to date, is that the Offers guaranteeing they’ll bring a certain amount of cash to the Closing table in the event of a lower Appraisal are the Offers that get chosen as it’s less risk/more reliable for a Seller. (*Little understood fact, fyi: The “Closed” sale price effectively sets a new value standard in the neighborhood regardless of what it appraised at during the transaction. ; ) This tactic is obviously limited to those who *have * the cash to do that, and the whole scenario is part of what’s driving the angst /frustration around this supply and demand phenomenon and how it affects, say, first-time home-buyers. Considering the fierce competition driving prices higher, Appraisers and Realtors alike have been wishing for a calmer, more “readable/predictable” market, and several factors *may* be causing this to be the case very soon. In the meantime, there are ways to win even if you don’t have the cash…or don’t think you do. One is to look in a lower price range than you want to buy in. This way you are able/have the means to at least push your Offer price over the heads of much of the competition. There are a few other things you can do to get an edge, but we can talk about those one-on -one ; )

April 2022 Numbers –

Overview/Fluctuations ~ Market Data:

Inventory inched up just a bit in April, and the comparisons to last year and the previous month’s data remain similar to the month before…down over last year, slightly up generally from the prior month, except for Pending Sales which are down a slight 1.3%. See below for more details on that. Total market time is down to 21 days, so activity is up as you’d expect in springtime & plenty of people are out looking for a limited number of homes. Rates continue to rise, so some of the less-than-typical/less-than-robust activity is traceable to that and to the low inventory that persists. It’ll be interesting to see May numbers as, anecdotally, Agents are noticing slowing and a bit of a pause in that usual Buyer-excitement cycle that distinguishes this time of year.
Rates: “We have seen continued pressure on rates as the Federal Reserve fights inflation. A 30-year fixed is at roughly 5.375%” Gary Boyer, Regional VP, Directors Mortgage

According to the RMLS Market Action Report  for the Portland Metro Area-April 2022:

  • There were 3,684 New Listings in April 2022 decreased 9.4% from April of 2021’s 4,065, and increased 4.6% from the previous month/March’s 3,521.
  • At 2,782  April 2022’s Closed Sales are down 5.6% from April 2021’s 2,946, and up 3.7% from the previous month/March’s 2022’s total of 2,683
  • At 3,005 April 2022’s Pending Sales are down 11.6% from April  2021’s 3,400, and down slightly at 1.3% below the previous month/March2022’s total of 3,045.
  • The Average Sale Price in April 2022 of $632,900 is up $75,000 from last year/April 2021’s $557,900, and up $22,000 from the previous month/March’s $610,900.  
  • The “Median” Sale Price (the price smack dab in the middle of all sales) in April 2022 of $560,000 rose from last year/April 2021’s $500,000 by $60,000, and $10,000 from the previous month/March’s $550,000.