In my forty years of assisting buyers and sellers navigate the purchase or sale of their home, which is for most their largest investment, I’ve never seen a market quite like the one Alaska is currently experiencing. An almost decade long lack of new housing inventory, coupled with now ‘almost’ historic low interest rates, has created its own real estate pandemic with multiple offers received on newly listed properties, sometimes within hours.
Being the winning bidder on a for sale home has become like the long odds of winning the lottery! So here are a few suggestions to increase your odds. First, make sure you’ve done your financial homework by securing a pre-approval letter, preferably from a local lender, who better understands the nuances of our market when it comes to closing costs and escrow holdbacks. Make sure your pre-approval letter states the specific type of financing you are approved for as a seller’s cost to close may vary depending on the type of financing you have selected. Sellers like to know exactly what their bottom line will be so be specific as to other closing costs. It’s pretty standard in Alaska for the seller to pay for the buyer’s appraisal but perhaps that’s a cost that you could pay for instead, along with all the escrow closing fees rather than the standard 50/50 split. Your offer will look cleaner and more forthright if you pay for all or almost all of the seller’s allowable closing costs. And make your offer with a real earnest money deposit for at least 1% of the asking price. Don’t write ‘due upon acceptance’ which in my mind shows a lukewarm intent. Doubling the amount to 2% and your offer will go to the top of the pile.
Most offers are written on the standard MLS purchase and sale agreement which provide several opportunities for the buyer to rescind their offer and receive their earnest money back. The first ‘out’ is when buyers and sellers can’t come to an agreement on the repairs recommended by a home inspector. Recently, I have seen buyers waiving a home inspection altogether. I’ve also seen buyers who have a home inspection but state that they will accept the property in ‘as-is-condition, despite the home inspection recommendations. In other words, the purpose of the inspection is simply to advise the buyer of potential future costs for maintenance and repairs. After the home inspection, the appraisal, the preliminary title report, have all been received and accepted by you, offer to make your earnest money non-refundable and disbursed directly to the seller with it to be returned to the buyer only if the seller fails to perform. Sellers like commitment and a non-refundable earnest money shows your intent to purchase.
So what should a buyer offer? Most realtors are taught to list property based upon ‘comps’. Those ‘comps’ fall into three categories—active, pended and sold comparable properties. In an appreciating market, active properties are the best indicator of fair market value. After all, buyers can’t buy a property that is already sold to someone else. Last year Anchorage’s average appreciation rate was 5.8% with some desirable geographical areas being even greater. If there are no active comparables, and you have to rely upon the historical data, a buyer should factor in the rate of appreciation when making their highest and best offer.
Buyers and sellers both like to know what their bottom line is so I am not in favor of the now popular escalator clauses where a buyer offers X amount over the highest and best offer. Make a strong clean offer for the most you are willing to pay for the home. And make sure your realtor has checked all the correct boxes; the dates are all coordinated and all signatures and initials have been made.
And good luck!
This Saturday I’ll be attending the Mat-Su Home Show. Over 320 homes have pended in the Mat-Su during the first quarter of 2021 so you might want to take a look at what’s happening out there.