If you’re a homebuyer in Boulder Valley, prepare yourself for a possible bidding war on that property you love.
Sales price exceeded asking price by more than 50 percent in March in Colorado and a handful of other states, according to the Colorado Association of Realtors®.
It seems that asking price has become nothing more than the opening bid price.
“Throughout the state, demand remains so strong that, despite a slight bump in new seasonal listings, buyers are simply viewing list price as the starting point for a bidding war that often includes waiving contingencies centered around appraisals and inspections and making sight unseen, cash offers well above the seller’s asking price,” CAR wrote in its report.
Multiple offers on a house are great – if you are the seller. But for buyers, it’s tough. Especially when the statistics show that buyers are paying significantly more than asking prices.
Boulder’s median price rose to $1.5 million in March, up almost 56% from the same period a year ago, reports Loveland-based Information and Real Estate Services, LLC (IRES). While Boulder’s median sale price tops the region, surrounding areas are also on the rise. Estes Park is the next most expensive in the area at $639,000, an increase of 11.1%. Fort Collins set a record of $495,000 for median price, up 16.5% Longmont and Loveland-Berthoud followed at $493,000 up 8.1%, and $430,000, up 7.5% respectively.
Since a bidding war may be in your future, here are six tips to help you navigate and win from Bradley K. Tuttle’s Real Estate Update.
This will not come as surprise, but if you’re not pre-approved for your mortgage, you’re not ready to buy a house. A pre-approval letter shows that you are a serious buyer and can afford the house, and minimizes the risk of your financing falling through.
Skip the mortgage
If you can make a cash offer, you’re likely to go to the top of the seller’s list. All-cash offers save on worry about financing problems and the time underwriting requires.
Contingencies are conditions that have to be met before a sale can go through. You are stating that if something goes wrong with the appraisal or inspection, you will still buy the house at the price offered. Unfortunately this can tap into your down payment funds, and increase the amount you need to borrow.
Offer a big deposit
If you want to show a seller you’re serious, have a large deposit ready. A bigger deposit or down payment means you’ll need less money from the bank, which can make the difference if the bidding war put the home’s price above the appraised value. It’s important to realize that lenders will not loan you more than the home’s appraised value.
Use an escalation clause
If another offer or bid increase matches yours, an escalation clause details the amount your bid will increase. It benefits the seller and sets a limit so you don’t overspend.
As in all financial matters, it’s important to establish pre-set limits and be prepared to walk away from a home.
By Tom Kalinski is the broker/owner of RE/MAX of Boulder, the local residential real estate company he established in 1977. He was inducted into Boulder County’s Business Hall of Fame in 2016 and has a 40-year background in commercial and residential real estate. For questions, e-mail Tom at firstname.lastname@example.org, call 303.441.5620 or visit boulderco.com.