"Please take our offer..."

It’s interesting that the housing climate has changed so quickly. Some buyers, who think they’re still in the driver’s seat, find the market is now going up and they’re losing the home that they really want.

Multiple offers are increasingly more common and buyers are frustrated because even full-price offers don’t guarantee that they’re going to get the home. In an effort to personify a contract offer and add emotional appeal, buyers are including a personal letter to the seller.

In most cases, the seller wants to maximize the net proceeds from the sale by getting the highest price with the least expenses and an assurance that the home will actually close on time without surprises. When a seller is faced with multiple offers that may be close to the same net, an emotional appeal might make the difference in them accepting a particular offer. That’s where the letter comes in play.

It should be a relatively short letter that gets to the point. The tone of the letter should be humble while positive and definitely, shouldn't mention that you may have lost other homes due to multiple offers.

1. Try to identify a common feature or characteristic of the home that is important to the seller and you.
2. Don’t criticize the home or tell them about all of the improvements you need to make to justify your offer.
3. Do verbalize why living in this home is important to you and your family.
4. Assure the seller that you can indeed qualify for the home and that if they accept your offer, the sale will be consummated.

After writing the letter and eliminating the non-essential parts, read the letter a few times to your spouse or friend. Polish the verbiage and check the spelling and grammar. If your handwriting isn't attractive and easy to read, print it. Use nice paper to appeal to the tactile senses. Attach the letter to the offer so they’re considered simultaneously.

Being pre-approved with good credit, adequate financial resources, good employment, sufficient earnest money and a reasonable offer with minimum contingencies will favorably position you. A personal letter might be the deciding factor in your favor.

Boomerang Buyers

It's estimated that 10% of the homes sold in 2013 will be to buyers who lost a home in the past five years.  Approximately 500,000 buyers who may have thought they wouldn't own a home anytime in the near future will be homeowners again.


It's estimated that several million of these previous homeowners will purchase again in the next eight years.  This kind of activity will contribute significantly to the housing recovery.

Some people thought that the housing crisis would cause a shift in values placed on owning a home but the boomerang buyers definitely don't support that theory.  Having a home of your own, where you can raise your family, share with your friends and feel safe and secure is still part of the American Dream.

The rising rents, increasing prices and low, low mortgage rates are also influencing buyers into the market.  In many cases, it is cheaper to own that to rent.

All new buyers, including those who have experienced foreclosures or bankruptcies, must have good credit history and the ability to repay the loan.  It just may not take as long to reestablish the credit as some would-be buyers might have thought.

Read more about Bidding Wars This Spring, Spring's Wild Card and Boomerang Buyers.

When to Sell the Temporary Rental

 Some homeowners, who were not able to sell during the recession, chose to rent their homes instead. In some cases, they didn't need to sell their home at the depressed prices and opted to rent it until the market recovered.

It's a valid strategy but there are time restrictions that could have serious tax implications for some homeowners.

The section 121 exclusion for gain in a principal residence requires that the home is owned and used as a main home for at least two years during the five year period ending on the date of the sale. This allows a homeowner to rent their home for up to three years and still have some part of the exclusion available.

The sale of a home with a $200,000 gain that qualifies as a principal residence would result in no tax being paid by the owner. Comparably, a rental property with the same gain could have a $30,000 or higher tax liability depending on the length of ownership and tax brackets of the investor.

The housing market has dramatically improved in the last year. If you have a gain in a home that has been your principal residence and it has been rented less than three years, you might want to consider selling it while you qualify for the exclusion.

If you are considering a sale on your principal residence that has been rented, consult with your tax professional for advice on your specific situation. For additional information, see IRS Publication 523.

Low Inventories Indicate a Trend

Low inventory is a relative term depending on how you're comparing it. Would the comparison be to total number of homes on the market last year, homes in a certain price range or homes in a certain area? In some situations, it's a combination of all of those things.
In any given market, inventories will fluctuate based on area and price range. The National Association of REALTORS® considers a balanced market to be six months' supply of homes. If it takes longer than six months to sell, it is thought to be a buyer's market and less than six months, a seller's market. Most buyers and sellers probably feel inventory equilibrium is more like three month's supply of homes.
Inventory has a direct impact on price. During the housing bubble, demand decreased, supply ballooned to four million houses and prices dropped dramatically. Increased inventories due to foreclosures, bank' revised lending practices and builder's lack of new housing starts each contributed to the dramatically lower prices.
As the market has recovered, economic conditions have improved, banks have loosened their requirements, interest rates have remained low, foreclosures have slowed and gradually, the inventory has been reduced to approximately two million houses. When demand is constant but inventory is reduced, price tends to increase because the same number of people are trying to buy a smaller than normal number of homes.
Based on the low mortgage rates that have been inching up each week in 2013 and an improving consumer confidence level, most markets are experiencing some increase in demand. With inventory decreasing, buyers in the marketplace can see that prices are increasing.
Just as signs of spring can be seen to be just around the corner, it should be recognized what direction prices will be moving. Hindsight is 20/20 but we can't purchase or sell in the past. We need to make decisions today on what we think will happen in the future.
If you're curious to know what inventory conditions are for your specific market, send me an email with the price range and area and I'll send you a report. 3737500@gmail.com