Spring has sprung around the Denver area and with the changing of seasons and new life sprouting everywhere there also begins the new busy season in the housing market. Have you decided this spring might be the perfect time to start looking for that dream home of yours? There is no time like the present and as Denver continues to grow on the daily, if you are ready to purchase a home, start looking today but be prepared for what you might run into along the way.
In the Denver market, many buyers are paying over the list price, which can be hard or uncomfortable when you are entering the market with a specific budget in mind. Due to this being a sellers market where homes sell quickly and sellers have a lot of pricing power often even the appropriately priced homes in the Denver metro region sell quickly and receive multiple offers and even cash on the spot offers. In the last month alone, 48 homes in Denver 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 a verifiable range based on those sales. Please understand this is a range and there is not set number. To ensure the home is priced accordingly, ask your Realtor to look at sold and under contract comps in the neighborhood and to discuss those with you.
With record low inventory and high buyer demand this is causing homes in the Denver metro region to appreciate rapidly. The rule of thumb is to look at comps within the last three months. If you look back further than three months this can 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. This means that the home you could have purchased 12 months ago for 400k is now worth 451k. This provides a solid case and can make you more comfortable when offering over list price. One thing not to do is wait to make an aggressive offer until you have searched for months and lost out on several homes due to being outbid because you could very well price yourself out of the market. Here 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 a competitive edge and more leverage.
· Unless you are 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, you will need to account for the difference.
· 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 homes estimated value, in order to get under contract, there is 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 do not 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.
If you think you are ready to dive in and start looking, start your search here. I know how daunting it can be to begin looking for that dream house of yours and I am here to help you take those first and last steps to securing that special place.