Do pre-emptive purchase offers work?

Eager buyers employ tactic in high-demand markets

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Eager buyers employ tactic in high-demand markets

Dian Hymer
Inman News®

The home-sale market has come to life this spring for the first time in years. Inventories of homes have dropped, interest rates are near all-time lows, and buyers feel the market has hit bottom and they'd be wise to buy now before prices rise.

It's impossible to call the peak or valley of a market cycle until after the event has occurred. In some hot micromarkets, like the housing markets around Northern California's Silicon Valley, the market may have bottomed a while ago.

In Silicon Valley, the inventory of homes for sale is too low to satisfy the demand of eager, newly made millionaires. The result is multiple bidding contests and sale prices over the list price, sometimes hundreds of thousands of dollars more.

Silicon Valley is an extreme example, but there are low-inventory niche housing markets around the country, which is good for sellers and tough on buyers. Reminiscent of the bubble of 2005 and 2006, buyers often have to make offers on more than one listing before they have an offer accepted.

Sellers in a low-inventory market may list their home on the low side of market value hoping to stimulate multiple offers and a higher price. In this case, a date is often set for offers to be heard. The date is usually after the house has received market exposure; giving the sellers more of a chance that more than one buyer will make an offer.

Some sellers don't feel their property has received enough exposure until it has had two public open houses. They might decide to hear offers a few days after the second open house.

HOUSE HUNTING TIP: Buyers competing in a market that's short of inventory have the option of trying a pre-emptive offer. A pre-emptive offer is one that is made before the seller's predetermined offer date.

Let's say that you, like the sellers, feel that a home you want to buy will receive more than one offer. You want the house badly enough that you're willing to make an offer before even knowing if there will be multiple offers or not.

Even though the sellers have told their real estate agent that they don't want to hear an offer before a certain date, some do. There is no guarantee that your early offer will be accepted or even reviewed by the seller. Some sellers will stick to their word and wait until the official offer date.

There's also no guarantee that you will successfully avoid competition by making an offer before the due date. Recently, sellers who said they would wait until after the second Sunday open house to entertain offers changed their mind when they were told that an offer had been written before the first open house.

This buyer made a full-price offer and gave the seller until 2 p.m. the next day to respond. That night the listing agent received a call from another buyer's agent who wanted to know when offers would be presented. Upon hearing that an offer had already been made, the second buyer made an over-asking-price offer that was accepted.

If you're going to make a pre-emptive offer on a property that you think is well priced, you might want to offer over the asking price to make a positive impression on the sellers. Your offer should be good enough that the seller will be encouraged to carefully consider it even if there isn't another offer.

Your financing should be in order, and include a strong preapproval letter from a lender. To maximize your chances of acceptance, make sure that your offer isn't littered with contingencies.

THE CLOSING: Keep it simple and back it up with confirmation of your sincerity and ability to perform.

Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author of "House Hunting: The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide."

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