Buying real estate is one of the most complex undertakings of your life. Success is much easier to live with than failure, so decide from the start what "success" means to you in terms of purchasing real estate. Then, be prepared to learn everything necessary to achieve it.
Savvy buyers take two approaches when preparing to excel at buying real estate, especially in hot markets and sought-after neighborhoods:
1. Buyers learn as much as they can about the legal, financial, and decision-making aspects of purchasing; and
2. Buyers leverage the relevant, up-to-date knowledge and expertise of the real estate professional or sales team identified as the best fit to achieve goals important to the buyer.
Among the practical real estate abilities that give buyers the edge during hot real estate markets, regardless of price point, are two essential buying skills: 1. Million-dollar True-Value Validation; 2. Revved Up Decision Making.
Skill #1. Million-dollar True-Value Validation
For years, "million dollar" was the "Big Deal!" label for homes and everything else. Now, it's no big deal. Million-dollar homes are commonplace. In neighborhoods full of multi-million-dollar houses, these homes are the "cheapies." For instance, San Francisco has been overrun with million-dollar homes[—]an increase of almost 40% since 2012, according to Trulia.
In many cases, this increase in price has not been earned by improvements in architectural design and construction quality. Paying more for less is the really significant aspect of the price-inflation trend. Don't be impressed by 6- or 7-figure-numbers. Be impressed by true value[—]location and the quality of design and construction. The more that buyers understand about how location influences local real estate value and how to identify quality construction and building design, the more likely it will be that their 2016 purchase retains its value and appreciates over time.
Skill #2. Revved Up Decision Making
The "Days on Market" statistic for listings was originally an indicator that a listing had problems, in one way or other. High demand and low listing inventories can drive "Days on Market" down and drive up selling price. Buyers benefit from investing time in learning strategies for beating out other offers, instead of just "hoping we get it."
Each buyer or buyer couple will only experience the emotionally-draining roller-coaster contest of multiple offers once (if their offer is accepted) or a few times (until their offer is accepted or they give up). They may not fully understand what is going on, especially since everything may move very quickly and buyers are not directly involved in most of the negotiation.
So who do you think is best equipped to "win" the multiple offer contest? No contest here. Real estate professionals are emotionally-detached negotiators who earn their living successfully negotiating multiple-offers, week in and week out, during hot markets.
When buyers know they are facing the possibility or probability of multiple offers, they will benefit from learning exactly what that means. Select an experienced real estate professional who is an area authority and who has a proven track record of helping client buyers achieve their goals. Ask the professional for details on past multiple offer situations and take notes. Which strategies are there? How do you decide which strategy to use? What are all the common mistakes buyers make? Buyers benefit from understanding the entire buying process before they plunge in and begin viewing properties.
Purchase price is only one feature of an offer to buy real estate. For instance, closing date, what is included in the purchase, conditions on purchase, financial ability to close, how well sellers relate to buyers' intentions for the home, and other factors must be carefully considered when dealing with multiple offers. Which items are most important to the seller can rest on many factors, including emotions. The real estate professional's ability to extract details about the seller and the property will be key to creating a stand-out offer that the seller is drawn to accept. It may not be the one with the highest price either.
Bonus: Earned Trust
To backtrack a bit, if buyers do not have complete trust in the expertise of the real estate professional they choose, they are both in trouble. Could you plunge in and agree to significant additional increases in purchase price or dramatic changes in closing date if you did not have full confidence in the professional representing you? Would you listen to suggestions to continue with negotiations or to step away from the property?
When you want to achieve your goals in spite of multiple-offer contests, begin by being sure about your fit with the professional you've chosen to help you become sure about location and value. Then study the multiple offer process to be mentally prepared and financially ready to take steps you can live with and to avoid disappointments you do not want to live with. Then, go looking for that dream home.