Buyers Face Stiff Competition for Properties
Your buyer clients will need to stand out from the crowd in order to get a contract accepted. Many properties are going under contract quickly and often with multiple offers above listing price. Consider these tips for helping buyers put their best foot forward in this increasingly common scenario.
Prepare Them to Possibly Pay More
With such limited supply but no decrease in demand, home prices have been rising in most Texas markets. Stephen Etzel, a real estate educator, consultant, and broker based in Roanoke, Texas, tells clients to expect to pay full price in most situations. “In some markets, people are paying $10,000, $15,000, $20,000, or higher over the listing price.”
Prepare them for the possibility they may have to pay out-of-pocket. Since lenders approve loans based on the appraised value of a property, buyers may need to close the gap between what they can borrow and the price of their offer. You can help set buyers’ expectations by showing them recent sales information.
Make Sure They Understand the Appraisal Addenda
It’s important that your clients understand how to use TREC’s Third Party Financing Addendum (TXR 1901) and the Addendum Concerning Right to Terminate Due to Lender’s Appraisal (TXR 1948). Knowing ahead of time how the provisions of these forms work can help buyers make faster choices about how they want to structure their offer and what protections they want in place pending the outcome of the appraisal.
Sellers like offers from pre-qualified buyers, since those buyers have already contacted a lender to see how much money they might be eligible to borrow. Cash offers—for those buyers able to do so—are another attractive alternative to sellers, since they are easier than more complex financial arrangements.
Etzel points out that pre-qualified buyers know their budget and can make offers more quickly than buyers who haven’t taken this step.
Be Ready to Move Quickly
Texas homes spent an average of 48 days on the market in January 2021, down from 68 days in January 2020. Many properties are selling much faster than that. Etzel recommends counseling buyers so they know exactly what they’re looking for and can make offers quickly. If their offer isn’t selected, buyers need to be able to move on just as quickly.
Learn More About Helping Sellers with This CE Class
Handling Multiple Offers and Multiple Buyers teaches a seller’s options in responding to multiple offers as well as options for communicating those responses. You will also learn the duties and responsibilities to buyer and seller clients and how to advise them when considering multiple offers. The next course takes place March 24 and is available as a live broadcast. To register, visit texasrealestate.com/findacourse.
Be Accommodating to the Seller
Etzel says one way to stand out is to make fewer demands of the seller. Each request is one more reason the seller might choose a different offer. Your client might forgo asking for closing costs or seller concessions, or even offer to pay for the owner’s policy of title insurance, as described in Paragraph 6 of the One to Four Family Residential Contract (Resale) (TXR 1601).
Earnest Money Amounts Can Help
Buyers who commit more earnest money show the sellers they are serious about buying the property.
Don’t Overlook Option Money
Offering more option money may be even more attractive to sellers than a higher amount of earnest money, Etzel says. The option money goes to the seller even if the buyer terminates, which can be enticing.
When Representing Sellers, Be Fair or Beware
Congratulations on receiving multiple offers for your seller’s property. What do you do now? To comply with Texas Real Estate Commission rules, you and your client’s next steps must treat all prospective buyers fairly or you risk disciplinary action.
Before Offers Arrive
Consider talking with your client about the possibility of multiple offers. Do you and your client want to tell all buyers’ agents, or none of them, that there are other offers on the table?
After Offers Arrive
Consider using the Seller’s Estimated Net Proceeds (TXR 1935) to determine the advantages of each offer.
Your client isn’t required to accept a full-price offer or the offer with the highest price. Instead, your client has the following options:
- Accept an offer.
- Use Seller’s Invitation to Buyer to Submit a New Offer (TXR 1926) to let all buyers know what terms are more acceptable to the seller. This form does not constitute a counteroffer to any buyer and allows the seller to consider and accept other offers.
- Propose a counteroffer to one buyer. The counteroffer remains open until the buyer rejects it in writing or the seller withdraws it in writing. The seller should never send multiple counteroffers at the same time because doing so could obligate the seller to more than one buyer and create legal problems for the seller.
- Reject all offers and tell all buyers to submit their highest and best offer.
The one thing you and your client cannot do is to share the terms of one offer with only one buyer’s agent. TREC rules forbid giving an unfair advantage to one buyer over another, so disclosing the terms of an offer to a different buyer’s agent so they can “get the deal” could subject you to discipline.
Texas Markets in January
48 Average Days on Market
1.6 Total Months of Inventory
According to the Texas Real Estate Research Center, 6 to 6.5 months is considered a balanced market
Months of Inventory for Major Metros:
- 1.9 Houston
- 1.6 San Antonio
- 0.4 Austin
- 1.4 El Paso
- 2.2 Corpus Christi
- 1.8 Laredo
- 1.1 Dallas-Fort Worth-Arlington
12.7% Texas median price increase year over year
$262,000 median price
Use MarketViewer—the exclusive data tool for Texas REALTORS®—to access the latest market data and generate custom reports and infographics. You can get statistics for your county, city, ZIP code, and even many neighborhoods. Visit texasrealestate.com/marketviewer.