Southeast Michigan March 2022

Offer Up

For the past several years a recurring story we have told is that inventory remains tight. In 2018 with only 7,711 available listings we were reporting on tight inventory levels and intense buyer competition. Since the pandemic hit, inventory levels have been slashed in half. Current active inventory sits at 3,615, which is only about half as much of the average of 6,830 we have had over the past 6 years. Although new listings are trending upward from 2021, we still have a long way to go to reach somewhat normal inventory levels. In the meantime, buyers will be forced to compete for the best listings. Here are 10 strategies to help you win those prime properties against the competition.

1. Cash Offer—Cash is king and eliminates potential

risks perceived by seller. Not everyone has the

luxury of paying cash, but don’t overlook this

possibility when discussing options with buyers.

2. Escalation Clause—This method is intended to

squeeze out the competition by offering “$xxx”

more than any other offer received. Be sure to

include a ceiling cap, or you may run the risk of the

appraisal coming in short—our next point.

3. Appraisal Waiver or Gap Coverage—If your client has

the financial ability to put more down, the offer might

include language that covers the difference (usually up to

a point) if the appraised value falls short of the sale price.

Be sure buyer and lender are on board with this prior to

making such an offer.

4. Extended/Free Seller Occupancy—With fewer

homes on the market, sellers may need time to find

their next home before they can move. Offering to

extend post-closing occupancy, or letting the seller

stay for free might sweeten the deal.

5. Letter from Buyer to Seller—Building a connection

and making the transaction more about the people

than the money sometimes helps a buyer gain an

advantage. Keep it short, stay positive, and thank

the seller for considering your offer.

6. Larger EMD—Money talks. Increasing the EMD

sends the message that your client is committed.

It helps reduce the seller’s risk that the transaction

will fail.

7. Inspection Waiver—You don’t need to completely

waive the inspection if you arrange to have your

buyer bring the inspector to a showing. Do

an abbreviated inspection so it’s taken care of before

making your offer.

8. Increase Down Payment and EMD—larger sums of upfront money may reduce the seller’s perception of risk

that your buyer will run into financing issues while

completing the transaction.

9. Strong Preapproval—The fewer contingencies in

the approval letter the stronger it will be. Approval letters

don’t need to match your offer exactly. If your buyer can

go significantly higher, it may reduce the perception of

risk to show the higher amount. Some preapproval

letters have more holes than Swiss cheese. Work with

your client and their lender to make sure yours doesn’t.

10. Be Likable, Professional, and Easy to Work with—

It isn’t always the biggest offer that takes it. Sellers

often base their decisions on perceived risk and

sometimes it’s because they like that you and your

client showed respect when you took your shoes off.

Oakland County

A tight and picked-over supply of available homes continues to challenge buyers and limit prices. Homes are selling as quickly as they arrive and the fresh inventory is creating new bidding wars that will again drive up prices like we saw in first half of last year. Prices took a mild dip in the second half of the year. The price drop had more to do with the picked-over available inventory, rather than any decline in value. Prices are again rising. Year-to-date average sale price and price per square foot are up 11% and 13%. Expect sharp competition from this year’s new buyers and last year’s carryover buyers to sharply drive up the price per square foot line (chart above) like it did last year. Expect buyers to attempt to land a deal early and beat the coming interest rate increases.

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