Paying over list price to nab your next home can be hard to stomach for many buyers. Often, appropriately priced homes in the Denver metro region sell quickly and receive multiple offers. In fact, last month, 48% homes in Denver's urban neighborhoods went under contract in 7 days or less and sold for 102% of their original list price.
The seller and the listing agent determine the list price based on the current market and by comparing recent sales of similar homes. If priced well, the home will fall within an identifiable range based on those sales. Understanding that there is a range - not a magic number - is one way to overcome this mental hurdle.
To ensure the home is priced appropriately, ask your Realtor to look at sold and under contract comps in the neighborhood and to discuss those with you. Keep in mind that record low inventory and high buyer demand are causing homes in the Denver metro region to appreciate rapidly. Therefore, whenever possible, make sure the comps you're reviewing fall within the last three months. Looking back much further could skew your price point and your mental willingness to aggressively pursue the home.
Denver homes appreciated at an average of 17% over the last year. That means that the home you could have purchased 12 months ago for 300k is now worth 351k. It provides a solid case (and more comfort) when offering over list price. If you wait to make an aggressive offer until you've searched for months and lost out on several homes due to being outbid, you could very well price yourself out of the market.
The following are some guidelines you and your agent can employ to help you get under contract and into your next home:
Pursue homes priced below the top of your price range. Giving yourself a 3-5% financial buffer will allow you to comfortably bid over list price, providing you more leverage and a competitive edge.
Remember your lender will require an appraisal of the property. Unless you're paying cash for the property, an appraisal will be required. The appraisal is an official report comparing similar properties (comps) to determine the value of the home you are purchasing. The lender will use this appraised value to determine how much money they will lend to you. If the offer you submitted on the property is higher than the appraised value, that difference will need to be accounted for. As the buyer, be prepared to make up that difference by bringing cash to the closing table. If the seller is willing to negotiate, they may adjust the purchase price or look to find a compromise between the two.
If you reviewed the comps with your Realtor prior to making an offer, you should have a realistic idea of the value of the property. If your offer far exceeded the home's estimated value in order to œget under contract, there's a good chance the deal will crash at appraisal. Another buyer, the one with the solid and realistic backup offer, is waiting for this to happen. Moral of the story: Make sure you can follow through on your offer before submitting it.
Consider terms when writing a competitive offer. The highest offer is not always the deciding factor for sellers. In other words, those with the most money don't always win. A well-written contract with terms that address the seller's needs is equally important.
- Does the seller need to find a replacement home? If so, your offer should allow them time to do just that.
- Will they consider making a concession for updates or closing costs? If not, don't ask for them in your initial offer.
- Are there any other offers on the property? If so, you need to adjust your offer accordingly.
An experienced Realtor will call the listing agent to ask questions specific to your purchase, allowing you to craft an offer that works well for both parties.
The fact of the matter is: If multiple parties are imagining living in the home you love, you've got to move past the list price before putting out the welcome mat.
Talk to your Realtor about thoughtful strategies to secure your next home, and if you think you are ready to dive in and start looking, start your search here!
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