Despite the economic fallout of COVID-19, the Boise real estate market continues its hot streak. This is especially interesting when we compare where we were this time last year. Inventory is down almost 23% and the number of days a house sits on the market is down 12.5%. This is especially true in micro-markets. Micro-markets are smaller localized sections of the city’s overall housing market with their own defining features and price ranges. For example, under $1 million in the North End is a micro market with very limited inventory. Compare that to new homes over $500K in Eagle, where there are more homes for sale. Because we’ve been in a booming real estate market since 2012, I’ve found useful tools to ensure my buyers get the homes they want.
When my buyers are discouraged by the lack of inventory or “bidding-war” hearsay, I tell them this. Your Boise dream home is out there, and there are ways to gain an edge when there are multiple interested parties. Multiple factors play into a seller’s motivation when they choose a buyer out of multiple options. Obviously the price you offer is key, but so is the earnest money you promise and when it gets released. Waiving an appraisal and conducting an inspection for informational purposes only can also make your offer more attractive. In addition, writing a personal letter and choosing a quick closing date are good opportunities to stand out, but they do not always guarantee success. Keep reading for more information on each of these tactics.
# 1 – Price
There’s a learning curve when it comes to understanding Boise home values. Ultimately, the value is based on what the home is worth to you, and what you or another buyer is willing to pay for it. If there are competing offers on a home, you’re likely going to be offering over the asking price. How much over will depend on if this is your first bidding war, or if you’ve lost out on a few homes already. It will also depend on how many competing offers there are. You won’t know what the other party is offering, so you will have to decide how much you’re willing to spend on the house when you craft the offer.
Is the house next door to your parents? Then it might be priceless. Does the house have flaws that detract from its value? Then you might not be willing to go much over asking, if at all. The home might also be improperly priced to begin with, such as by being below market value to encourage a bidding war. While typically we don’t see homes go for hundreds of thousands of dollars over asking, they can sometimes go as high as 10% over the asking price.
Note: Many buyers ask about escalation clauses. This means you’ll pay the seller a certain amount over any other bid up to a maximum amount. While this can be effective, some sellers won’t consider those offers and only want buyers to come in with their “highest and best” offer However, if you think this is something you would want to include with your offer, consult with your Realtor.
#2 Earnest money
Earnest money is an important part of any real estate transaction. The amount you set for earnest money in general tells a seller how interested you are in their home. A standard earnest money deposit in the Treasure Valley is approximately 1% of the sale price. To beat out other offers, you can offer more than that, especially if you’re providing more than 20% as a down payment. Once you have an agreement with the seller, the earnest money is deposited typically to your Realtor’s broker for holding in escrow. This money is then credited back to you at closing; however, you can request that the broker release this money to the seller after the contingencies have been met (e.g. inspection, appraisal are conducted and accepted). This is a good tactic to sweeten the pot. Sellers love to get cash in hand ahead of the closing to pay their movers.
# 3 Appraisal
Speaking of the downpayment, if you’re putting more than 20% down or if you have healthy cash reserves, you can also offer to waive the appraisal. This shows you’re confident in the price you’re offering. If the appraisal comes in low, just beware that you will have to make up the difference between the appraisal value and loan amount. From my experience, it’s rare to have a home come in low on the appraisal. If it does, you might just need to rearrange your down payment a bit. If you have good credit and are putting 20% down or more, a bank might also offer to waive the appraisal.
#4 Conduct an inspection for informational purposes only
If you are comfortable with a thorough review of the home and don’t think the inspection will be an issue, you can offer to conduct your home inspection for informational purposes only. This approach is one not many buyers or Realtors think to use. It gives the seller some sense that you won’t come back to nickel and dime them. If something does come up in the inspection, you retain the right to terminate the deal based on an unsatisfactory inspection. A first-time home buyer with limited funds might be uncomfortable with this approach, which is understandable. Just remember, in Idaho, it’s not the seller’s responsibility to bring the home up to code or your standards, much less ensure everything is in working order. Any items of repair are negotiable, and there’s no expectation that everything will be fixed.
#5 Personal letters
Many buyers ask me about writing personal letters. I think they’re a wonderful way to express the emotional story of buying a new home. Some sellers care about who takes over the love and care of their home. This can be especially true if they receive multiple offers and want to know more about the buyers. Once, a seller who was a retired nurse received a letter from a young nurse starting a family. She decided that while they did not present the best offer in the bunch, she wanted her home to be passed on to someone coming up in her career.
I also suggest buyers to tread lightly when writing and understand that sellers might not ever see the letters. Some sellers are simply investors who only care about the bottom line, so don’t take it personally if your letter is ineffective.
There’s one last thing to mention: many buyers who are used to shopping in cooler markets are surprised when a seller wants to close as soon as possible. When you begin your home search, try to figure out a timeline to move that will work for you. Then be prepared to be flexible. If you craft an offer for a vacant home, the seller will likely want to close quickly. Be sure you’re pre-approved and working with a good lender who can make it happen.
While the Boise real estate market’s hot streak isn’t new, when you find a house you want, things happen fast. This means it’s best to know where you stand on all of the above before you even craft your offer. Of course, it also pays to have a good negotiator on your side. I always encourage my buyers to go for it when it comes to pursuing their dream homes. I have decades of successful experience in the Boise real estate market and have helped hundreds of people purchase homes in the Treasure Valley. When you’re ready, give me a call or shoot me an email at email@example.com.