House hunters in Newport Beach, Costa Mesa, Orange County and elsewhere are encountering formidable old foes… ample competition, multiple offers and all cash buyers.
Well-priced homes in desirable areas are rare – and thus a precious commodity. Some homes in sought-after neighborhoods are selling like hotcakes, above list price, with multiple offers submitted within days of listing. The downturn in the housing economy and the “seller’s markets” of the past are in the rearview mirrors of many neighborhoods.
Simple economics of supply-and-demand are running the show in today’s market, not appraisals and “value” as they used to be known. While appraisers are doing their best to not jump on the bandwagon and keep prices to a modest increase, the appraisal is of little concern to many of today’s buyers, especially cash buyers (of which there are many) and/or buyers with enough cash to make up any lending shortfall.
Buyers need to understand this new reality. Sellers are getting premium offers, including all cash; so buyers need to think hard about their initial deposit amounts, loan-to-value ratio and any request for closing costs. Your competition is likely to have their funding ready, ample cash, no request for closing costs and no appraisal contingency. This is unfortunate for many first-time homebuyers and those needing a little extra assistance. Unfortunate, but this is the current reality that buyers need to prepare for.
What to do: Be prepared. Any offer in today’s market must be accompanied by 1) a pre-approval from a reputable lender, 2) copies of bank statements showing where the initial deposit and non-lender money is coming from, and 3) a copy of your FICO scores to demonstrate your ability to get the loan and close. Items 1 and 2 are deal breakers – no serious offer is lacking these documents. 3 (the FICO scores) help show your ability to close (presuming it’s a score your comfortable sharing). Many listings will even go so far as to mandate “cross-approval” with another lender (often claiming to want assurances the buyer can close; but also sometimes to steer to potential lenders). In those cases, be prepared to send your bank statements, tax returns, pay stubs and other lender-required items to that other lender ASAP.
Consult your local lender for pre-approval and a local REALTOR® to start your search. All real estate is local and only a local REALTOR® is best qualified to assist you in your desired market.
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