In February 2021, the median asking price for a newly listed single-family home in Rhode Island increased by 4.3%, while the median home price of sold listings increased by 16.4% when compared to last year. Sellers of well-priced homes are often receiving multiple offers that create bidding wars. Kim Marion, Sales Associate at Mott & Chace Sotheby’s International Realty, has some exceptional tips for buyers navigating the current real estate market.
1 . Connect with a Realtor
As the trends hold strong by way of historically low inventory and increased sales prices, Kim advises to first and foremost connect with a great local Realtor. This may seem obvious, but it is critical. “Partially for negotiation tips”, Kim said in a recent GoLocalProv interview, “but also because Zillow and some of the other sites aren’t being constantly updated. Buyers may get excited about a property they see online, call their agent, and it’s already under contract. That is a challenge.” Real estate agents have access to the Multiple Listings Service (MLS) and properties that are not listed on MLS, referred to as Non MLS listings. Buyers are not likely to know about Non MLS listings when searching without an agent.
In addition to MLS, the real estate specialists here Mott & Chace Sotheby’s International Realty offer clients the award-winning home search platform, RealScout. With listing information sourced directly from MLS, the details provided are always accurate. RealScout features property photos as the basis of the search platform, allowing buyers a simple and fun way to make decisions about their interest in a property. The tool customizes alerts for each clients’ specific, unique, and personal wants and needs.
Kim’s tip is to work with a real estate agent who can compile comparable properties from the last six months. “The market has changed considerably since 2019 and even early 2020. Looking at the last six months of sales is extremely important, and it can be hard to interpret without professional guidance”.
2 . Get Pre-Approved
This piece of advice, says Kim, comes with a couple of caveats. First, pre-approved buyers should not assume that pre-approval is everlasting. “Buyers should have a current pre-approval. They typically last about 30 days.” Another caveat, buyers should be working with a local lender. “I can almost guarantee buyers will do better with a well-known local vetted lender.”
Kim’s tip is to approach every listing as though it’s ‘the one’. Build a team inclusive of a trusted realtor and local lender ready to act at moment’s notice. This is crucial in a hot market when properties are moving quickly.
3. Negotiate Terms
“Everything in life is a negotiation,” Kim says, “when buyers think about the house, they are thinking about highest and best price, getting the offer in as quickly as possible, and the potential of having to offer more than the asking price”. There are, however, a few other ways a buyer could make their offer most attractive to sellers.
Inspection: One option is to waive the inspection completely, although this is not usually advised. A buyer could, however, have the inspection done for informational purposes only. “If a seller sees ‘for the buyer information only’ they can interpret that to mean this buyer may find something wrong, but unless it is a major defect (like a safety issue), they aren’t going to ask for it to be fixed.” Kim notes sellers may find relief in knowing this buyer isn’t going to nit-pick over every little broken thing.
Appraisal contingency: If buyers have funds available, they could forgo the appraisal contingency. This would mean if the bank values the home for less than the buyers accepted offer price, the buyer will pay the difference in cash. This eliminates the need for the buying and selling parties to have to renegotiate the purchase price.
Escalation Addendum: Buyers should use an Escalation Addendum in all of their offers. In an unpredictable market like this one, many assume a home is going to sell for thousands over the asking price, but it might not. An Escalation Addendum works this way: if a home goes up for sale and buyer and their agent suspect it will sell for higher than list price, the buyer will make an offer of the amount of their choosing. The buyer would then add an Escalation Addendum that says they will pay a certain amount over any other viable offers, up to a “highest and best” amount decided on in advance. For example, the offer would look like this: “We offer $550,000 for the property, and $2,500 more than any other viable offers up to $570,000.” The Escalation Addendum is designed to protect buyers from overpaying in the event that there are no other offers between the highest price a buyer willing to pay, and the asking price for the property. The listing agent must show other higher offers to the buyer’s agent to justify that increase in price dictated by the Escalation Addendum.
Stuff: Offer to clean out the seller’s unwanted items! One of the universally agreed upon truths is that moving is a pain. Buyers could make moving easier on the sellers by offering to get rid of old and unwanted items left behind and take on the clean-up of the property.
Earnest Money Deposit: Or EMD, is the money a buyer sends with the offer. Typically a $500-$1,000 deposit, buyers could consider offering a larger sum. While it may put the buyer at a little more risk, it shows the seller the degree of interest the buyer has in purchasing the house.
Kim’s tip is to mix some of these terms, when possible, together to add even more strength to the offer! When the market is hot, making the transaction as easy as possible on the seller might just be what wins them over.
4. Stay True to Your Limits
When the market is competitive, Kim reminds her clients to consider the emotional urgency. While one property may seem like the dream home, another house could come along that is better – or at least great. Overspending, just to stay in the game, can have consequences. “Interest rates are at a historic low so there may be a balance when borrowing more than the originally anticipated budget”, says Kim, “but there is nothing worse than living in a beloved home and barely being able to afford it.”
Kim’s tip is to find out as much as possible about the property before making an offer. “Don’t make a bad decision,” Kim warns. “Buyers in this market may only get fifteen minutes in the house to look around and then have to make a decision worth hundreds of thousands of dollars.”
5. Search the Seller
“Not to be creepy,” Kim laughs, “but because Rhode Island is so small. The buyer may have a connection with the current owners – and not even know about it!” It is not unlikely in Little Rhody to have something or someone in common with a seller – and that may just be the thing that wins interested buyers the property. “People make decisions about homes that are emotional. Buyers are eager and excited, and sellers are equally emotional. The sentimental history plays a part in how sellers value their home.
Kim’s tip is to try to connect buyers and sellers on a personal level so buyers can get their dream house.
Kim’s final (bonus!) tip for buyers in a competitive market is this: “This is a moment we are in and seasoned agents know how to handle it. Buyers will likely have to make multiple offers before landing a home, so be prepared for an emotional journey. Get into the mindset of staying hopeful, staying ready, and trusting your agent. A great agent is going to help buyers make it happen.”