A Story for Your House Please

by Geoff Smith

For at least three years now, inventory in the under $400,000-market here in Atlanta has been at record lows and buyers have been fighting each other for good deals. The result is a sharpened artform that many agents have crafted to be ‘the one’ chosen from the many.

I was reading a great article in the Wall Street Journal titled The Strangely Effective (and Easy) Way to Win a Bidding War. It details several methods agents and buyers used to win deals, and showed data collected by Seattle-based realty firm Redfin.

With inventory so low and competition so high, a listing agent’s job is to really find the buyer who can close with the best offer and with the least amount of fuss. I’ve heard of houses that have gone under contract the first day on the market and had more than 10 offers to sort through. I’ve been told of showings where the buyer had to wait for an hour outside the house while people before her were shown the house. If you are trying to by one of these houses, you have to make yourself stand out.

According to the article, the best way to stand out is to use cash. I would be a bad mortgage lender if I didn’t remind people that an average retirement account earns more than 7%, while mortgage interest rates are still in the mid-4% range. That said, using all cash nearly doubles your chances of being able to beat out the other offers. If you are using cash, that means you typically can close much quicker and without a bank having a say in your purchase. Listing agents like that.

Another method that appears to be highly effective, and one that I personally do not like at all, is waiving the financing contingency. This contingency basically gives the buyer in a contract a certain amount of time to get approved on their loan. If they don’t get approved in that time, they can walk away from their deal with the earnest money check(a deposit of sorts that is written and held in escrow just after signing a contract). This makes a listing agent comfortable because if there is no financing contingency, the buyer would have to kiss goodbye that check if they decide to walk away from the deal. This puts a lot of pressure on the lender to do a very thorough pre-qualification. Earnest money is typically 1% or more of the purchase price. But waiving contingencies apparently increases a buyer’s odds of winning the deal by 57.9%. So as an agent, you might earn their praise by initially winning the deal by waiving the contingencies. But if your lender doesn’t get the loan approved and they lose their earnest money, their perspective will very quickly change.

The method that came in third is actually my favorite: writing a personal letter. Having buyers write a personal letter to the sellers actually was a very close third, boosting your odds to win the deal by 52.2%. Selling a home can and should be an emotional endeavor. We live there and leave behind a lot of memories. Writing a letter telling the seller how you will live there, how you will maintain the house and what you love about the house seems to go a long way. The letter adds a personality to the offer and it also seems to let the seller know that the buyer is serious, according to the article. I have seen this method work on several occasions.

As a lender, my agents always make sure to let the listing agent know they can and should call me. This has proved to be a huge advantage. Our industry is a little wild-west and there are a lot of very inexperienced lenders out there. Giving the listing agent the opportunity to talk to me and, at the very least, find out that I am competent, experienced and that I did a thorough prequalification, goes a long way. Once the deal goes binding, everyone is to some degree at the mercy of the lender to get the money approved and bring the deal to close. So it is also important to make the listing agent comfortable with your lender.

With 90,000 people a year moving to the metro Atlanta area, it is hard to imagine that inventory will increase anytime soon. So sharpen your pencils and start writing some good stories.

Rates Push Further Up

Mortgage interest rates continued their steady march upwards this week. Economists are grappling with an economy that has no visible downside right now. As such, they are investing, the stock market is going up and so are mortgage interest rates.

What this Means to You:
According to Mortgage News Daily’s Rate Survey, best execution rates for a conventional 30-year fixed are at 4.28%.