Real Estate Revolution – How to Buy in a Seller’s Market (Part 2 of 2)

Last Updated June 14, 2022

We know that you know: the market is super tight right now, and even if you’re offering well above list price, it’s hard to get an accepted offer. Luckily, we’ve got some tips on how to succeed in today’s ultra-competitive real estate scene. Kip and Ryan continue their conversation from the previous week and offer specific guidance on all the ways that you can make your offer stand out above the rest. We’ve got advice on how to decide the amount you’re actually willing to offer, ways that you can sweeten the pot without having to give up too much, how your agent can get the inside scoop on what sellers actually want, and much, much more. Of course, we’ll also present our weekly market update as well as Kip’s Tips.

Voiceover: 0:02

Ladies and gentlemen, strap on your seat belts and hold on to your kombuchas. It’s time to get ready for the Real Estate Revolution.

Kip Lohr: 0:12

Welcome everybody to this week’s episode of The Real Estate Revolution Podcast. I am Kip Lohr, your host with LOHR Real Estate. I have in the studio with me our trusty co-host Ryan Neal of our Eugene office. Hi, Ryan.

Ryan Neal: 0:25

Hello, Kip. Hello, everybody. Thanks for tuning in.

Kip Lohr: 0:28

We’ve got another exciting episode for you this week. Why don’t you share with our listeners what they have in store?

Ryan Neal: 0:34

Well, on last week’s episode of the Revolution, we started to talk about how to buy in a seller’s market. You know, it’s a big conversation, a very rich topic. And we’re going to go even more in depth on how to craft a winning offer in the crazy market that we have right now.

Kip Lohr: 0:49

Yeah, this is an important enough topic that we had to split it into two episodes. And before we get started with that, every week we do a weekly market report. Why don’t you take it away?

Ryan Neal: 1:00

Okay, here’s the numbers for this week. In Eugene, we started to see more activity at the upper end of the market than we had during the first half of February. So there were 32 sales in the third week of February at a median of $488,000. That could be an indication that prices are on the up-and-up in Eugene. But pending sales for the third week had a median list price of $457,000. So we’re thinking that that’s really more representative of where Eugene’s market is right now. There’s a bit of appreciation. In January, Eugene homes had a median sale price of $440,000. But you know, it’s not too crazy, nothing like what we’re seeing in Bend, which we’ll go into in a bit. Inventory in Eugene is staying pretty much at a standstill. There were 52 new listings and 52 pending sales in the third week of February. There are 104 residential properties currently active in Eugene. In Springfield, though, inventory is starting to pick up just a little bit. There were 27 new listings compared to 21 pending sales. 39 properties are currently active, but that really still represents under a half a month of inventory. So inventory remains super low in Springfield. Pending sales had a median list price of just $395,000. So what it looks like in Springfield is that we’re still seeing these homes at the lower end of its market getting grabbed up faster than homes at the higher end, at higher price points. The median list price for active homes in Springfield is $450,000. So that’s really not too far off from what we’re seeing in Eugene. In Bend, like I said, prices are really going up. That’s still happening. In week three of February, there were 46 sales at a median of $797,000. And the 56 pending sales we saw were at a median of $784,000. As far as current inventory, there are 126 properties with a median list price of $897,000. Yeah, that’s pretty high, and inventory is still shrinking. There were just 45 new listings the past week, meaning buyer activity is significantly stronger than seller activity. And this is really the time of year when we should start to see that trend reversing. In Redmond, prices are ratcheting up too. In week three of February, there were 25 pending sales and those had a median list price of $550,000. We still have significantly higher inventory in Redmond than we do in Bend. There are 96 active properties, but these have a median list price of $572,000. So although that’s lower than in Bend, of course, we can’t really say that Redmond’s exactly budget friendly either. So that does it for this week’s numbers. We’ll have the main part of our show for you in just a moment.

Kip Lohr: 3:53

And welcome back to The Real Estate Revolution Podcast. I am Kip Lohr, your host ,and I have in the studio today, our co-host Ryan Neal of our Eugene office. How are you doing, Ryan?

Ryan Neal: 4:04

Doing great.

Kip Lohr: 4:05

So we are going to roll into how to craft a winning offer. We’ve guided you through kind of the nuts and bolts of the process of how a transaction goes from start to finish. And before you can really think about getting to the offer process, you need to think about the big picture. But now we want to kind of sit down and talk about the nuts and bolts of, you know, how to put an offer together. And, you know, because the inventory is so low, competition is so high. Most properties don’t last more than, you know, a week on the market. And decisions have to be made quickly. You have to be prepared and nimble in order to act quickly. And part of the being prepared is to have a process of getting to the nuts and bolts of being able to pull the trigger, and knowing what you’re willing to offer price-wise and what the terms of the offer are going to be. And that’s a little bit of a process. So to start off with, if the house is listed at $500,000, what should your offer be?

Ryan Neal: 5:19

So it goes without saying that there are a lot of different factors to consider when it comes to offer price. And obviously, this is kind of the place where you have to start. You know, if you’re thinking of making an offer, then you know, that’s kind of the number one thing to consider. And the number one thing that a seller is almost always going to be looking at is, how much are you offering? What are you putting on the table? So, there are several different parts of that equation. One of them–it’s very important–is how much is the property actually worth. So listing prices, they can be all over the board. I think what we see most often is that, you know, listing agents when they are setting the listing price in our local markets, they’re doing the market research and they’re setting a price which is appropriate given the values of homes that have sold in the last three months. But sometimes sellers will underprice a home in the hope of attracting more buyers, perhaps getting a bidding war going, and ending up with a higher offer price than they might have otherwise. And other times, agents will overprice a home and, you know, usually this is a bad strategy.

Kip Lohr: 6:30

For the seller.

Ryan Neal: 6:30

They may be pressured by the seller to go in at a price that, you know, is higher than an agent thinks a home actually should be on the market for. We all know you can go on Zillow and get a Zestimate for your home. And oftentimes these values are wildly off. You know, they can be lower, they can be higher. But if a seller goes on Zillow and sees “Zillow says my home is worth $560,000. And my agent says that we should put it on the market for $530,000,” there can be some pressure to go higher than that $530,000. So that’s a kind of unfortunate aspect of these automatic valuations, which simply cannot take into account all the different factors that need to be considered in setting that value.

Kip Lohr: 7:09

Yeah, and I think maybe it’s important before we get too far down the road in this conversation to talk about value and how we as professionals go about determining value. So when we’re in the position of working for sellers and helping them decide what they’re going to put their house on the market for, in our office–I’m going to speak to our process, because like you said, Ryan, the process is kind of all over the board in terms of what other agents do. But what we do in our office is we do a process very similar to what an appraiser is going to do. You know, the lender is going to hire an appraiser to determine value, and that lender is going to base what they are willing to loan based on what the appraiser comes in at value-wise. So our process is very similar to that. And we basically do a comparative market analysis, which takes sales within the last three months, typically in neighborhoods that are similar to the neighborhood of the subject property. And then we go through a plus and minus process where we’re trying to basically make an apples-and-apples comparison. Say, for instance, your house is 2000 square feet and it has been recently remodeled. There’s a recent sale on a home that’s 1800 square feet that hasn’t been recently remodeled. How do we turn those into an apples-and-apples comparison? Well, there’s modifying numbers that we will add based on square footage, the difference in price per square foot. And then also the amenities, you know the quality of the remodel or the quality of the appliances in your home. Do you have wood floors? Is there carpeting? Is it laminate versus wood floors? So we take into account all of these different finishes and amenities and lot size? And do you have a mountain view? Or do you not have a mountain view, and then we try to, you know, subtract value or add value based on the differences between the homes, which then results in a numerical value. Would you agree with that?

Ryan Neal: 9:20

Well, yeah, that’s, that’s that’s simply how we do it. And so like you said, not all agents are necessarily as thorough in that right, you know, doing their competitive market analyses. I was working with a buyer and the seller’s agent, in trying to give evidence for the value that they had established for their property, for their listing, gave us back what basically amounted to an average of the price per square foot in homes that were located all across town, and that was somehow supposed to give us the value that they were presenting. So that’s, I mean, that is that is certainly not the norm ,,but that’s an example of one method which–

Kip Lohr: 10:00

Could be skewed.

Ryan Neal: 10:01

Yeah, yeah.

Kip Lohr: 10:02

And so the point here is that you create a snapshot of Yeah, so like we’ve been talking about, one side of the equation comparative value as close to the time frame as the sale is going to happen. And when you’re in a fast-moving market like we have right now, it’s harder to come up with what that snapshot is actually going to look like. Because what will happen is that we can come up with a numerical value based on comparable sales within the last three months. And that’s a starting point now, because we also know that it’s likely we’ll see multiple offers; we’re likely to see irrational buyer behavior, FOMO. And so, you know, we’re going to get people that are going to make significantly higher offers than our starting point. And so there are some agents that take in to consideration this FOMO when they’re pricing it to begin with. And so their list price would be higher than where our comparative market analysis would come in at. In our office, we’re going to make a recommendation to our sellers to come in at the market value that we come up with understanding that we’re going to get a higher priced offer than that. And that we’re likely to get the highest offer if we encourage multiple offers, we encourage multiple people to be bidding against each other. If you start out too is how much is property worth? The other side is, how much are high, then you discourage that and end up skewing the number actually lower than what you likely could have gotten. This was a little bit of a digression, I understand. But the point here is, from a buyer’s perspective, what we are going to do for you is we’re going to go through the process of doing our own market analysis, we’re not going to take the seller’s or the other real estate agents’ opinion of value. When we’re making a recommendation to you about where we should start price-wise, or where it’s realistic that this price is probably going to end, we’re going to do that from an educated evaluation of our own, versus just basing it on what the list price is, because like Ryan said, the list price might be actually too low, or the list price might be way too high. And so depending on whether it’s one or the other, we may recommend that you come in at list price, because it’s already too high. Or we may recommend that you come in significantly higher than what the list price is. And it’s going to be on a case-by-case basis. So it’s really important to understand that that element has to be you willing to pay for it? And you know, this, obviously, is a taken into consideration before we even start the conversation of where your number is going to end up. So I guess this is a good way to segue into talking about how do we help our sellers determine what their number is. How do we help our buyers determine how much to offer exactly? Yeah, it’s irrational, actually.

Ryan Neal: 13:07

It really depends on you. And the more you know about what you’re looking for, and you know, how much this particular property, no matter what premium you may have to end up paying in order to put in a competitive offer, you know, is that really worth it to you? It’s a very personal decision. But in the process of working with an agent and getting into various different properties, seeing what’s out there on the market and, you know, just just really refining your sense of what you’re after, that’s going to put you in a much better position to, you know, be able to put all of your cards on the table if you do find a home which is super compelling to you and is going to face significant competition.

Kip Lohr: 13:57

Right. And, you know, one of the elements here that is less objective analysis than the other side of it. really important to understand is if you make an offer that ultimately does not get accepted, and you have determined “This is my highest/best,” and it doesn’t get accepted, and you find out that the buyer who won the lottery purchased the home for a price that you were willing to pay more money for, you’re going to be bummed out. And so, you know, we’re always going to recommend that you make your highest and best offer and not leave money on the table. And what that means–that’s different than saying we want you to stretch beyond your means. That’s not really what we’re talking about here. What we’re talking about is the psychology of this. And the psychology of this is, do not leave money on the table. You’re going to get one shot at this and the worst feeling in the world as a buyer is to find out that somebody bought it for less money than you were willing to pay. Would you agree?

Ryan Neal: 15:00

Yeah, with perhaps one caveat, which is, you know, oftentimes we have clients making offers on homes that they may be somewhat lukewarm about, they’re not certain that this is the right property for them. But you know, their kind of calculation is that “If I can get it at this price, then I’m going to feel pretty good about that.” So it needs to be said that oftentimes, if that’s your feeling as a buyer going into making an offer, you’re probably not going to get the property in the first place, right. But it can still be a worthwhile process to, you know, make that offer, to refine your analysis of what you are willing to put on the table, and maybe what you’re not.

Kip Lohr: 15:38

Yeah, and really, that the likelihood of you getting the first home that you make an offer on is fairly low. I mean, it’s not unprecedented; it’s not impossible. But we find that in this market, right now, you’re likely to make several offers before you actually get into contract. And so to your point, there’s going to be a refinement of your warmth on things, and what you would have been lukewarm about maybe three offers ago, you’re going to start getting hotter and hotter, because you’re going to start feeling like you’re missing out and that you’re not going to be able to purchase a home. And I guess that gets back to the psychology of this and another reason to have somebody to, you know, help you throw the brakes on if need be. And, you know, we’re much more likely to make recommendations not to do something than to do something. And so we’re going to be a backstop for you to make sure that you don’t get too swept up in the FOMO and make an offer that you’re going to have regrets about. You know, ultimately, we want you to have a good experience.

Ryan Neal: 16:46

So yeah, back to your point earlier, Kip, you know, let’s say you’ve made three, four, or five, six offers, and you haven’t gotten accepted and property does come up that, you know, you’re really at the point where this is a property that’s going to totally work for you. And you know that in order to be competitive, you have to put more on the table than what you initially had hoped would be the case.

Kip Lohr: 17:11

That’s right. And, you know, one of the ways we help mitigate some of that risk in the offer process is to help you understand where your top of the line highest price is. And we do that through an escalation clause offer where you make a lower price offer with an escalation clause that allows for a maximum offer of fill in the blank. Do you want to explain that a little bit?

Ryan Neal: 17:38

Yeah, so the way that an escalation clause is typically written is that you as a buyer are going to pay X number of dollars more than the next highest competing offer. So, let’s say there’s four offers on the table. The highest offer, which, you know, wasn’t you was a $450,000 offer. So you can actually make an offer at, say, $425,000. But you can include an escalation clause, which says “I’ll pay $3,000 more than the next highest competing offer,” which in this case was $450,000. So your offer effectively becomes a $453,000 offer. That’s giving the seller the option to take your offer at $453,000. Now, if that $450,000 offer wasn’t on the table, and you know, there weren’t any offers higher than your original $425,000 offer, then you’d only be on the hook to pay $425,000 for the property.

Kip Lohr: 18:36

Well, that’s right, and with that, we also recommend that there’s a cap, right. Maybe somebody makes a $470,000 offer. And now you’re required to, you know, make good on a $473,000 offer. And you’re really only wanting to pay a maximum of $460,000. Right? So we offer a cap.

Ryan Neal: 19:01

Yep, that’s a super-important point. And if you’re not putting a cap on your offer, then that’s going to raise some red flags in terms of what the seller and their agent think.

Kip Lohr: 19:09

That’s right.

Ryan Neal: 19:10

You know, they’re going to look at that and think that your agent hasn’t done their due diligence or your lender hasn’t done their due diligence in finding out you know, how much you actually are able to pay, so they’re going to be suspicious–and for good reason too, because, you know, in our current market environment, we have a lot of buyers making unrealistic offers that they aren’t able to perform on.

Kip Lohr: 19:30

That’s right. And the last thing you want as a seller is have a contract fall out. That actually can cost you quite a bit of money. So, again, to the details, you want to make sure if you’re going to use an escalation clause that you have a cap in that escalation clause so that you’re not paying more than what your top dollar number is.

Ryan Neal: 19:49

And you also want to get make sure that you get pre qualified at the amount that you’re setting your maximum cap at.

Kip Lohr: 19:56

That’s right. As well, you have to provide a prequalification letter up to that cap amount. And, you know, escalation clauses were relatively unheard of in Bend, Oregon up to about two years ago. We saw them here in Eugene before we saw them in Bend. And right now, there are listing agents who don’t like to deal with escalation clauses, because one of the reasons is that they become really complicated when there are multiple offers with multiple escalation clauses, right. And so, you know, there are agents who just don’t want to deal with it. So they recommend to their seller to not permit offers to be submitted with escalation clauses. So being able to know the answer to that question up-front is really important before you just throw out an escalation clause offer and then get thrown out because of writing an escalation.

Ryan Neal: 20:52

And it’s also important to understand that–you know, once again we have to emphasize that offer price is not the only factor that is going into the considerations that a seller is making. So it would be very easy, you know–if your offer includes an escalation clause which says, “I’ll pay up to $475,000,” and the next highest offer is at 450, so you end up offering 453. Well, the seller can actually come back to you and say, “Yeah, you know, your, your price is $3,000 dollars higher than this other offer. But there are other features about this offer that our seller likes. So how about we counter you at $475,000,” and you’ve kind of already, you know, put all your cards on the table already. So it can put you in an awkward position if you’re maybe not so excited about paying that full amount.

Kip Lohr: 21:44

Yeah, and that’s a really great point. And so there are obviously pros and cons to using that as a strategy. And you need to understand what the possible repercussions are, what the pros are or the cons. And I guess, honestly, if your highest/best would be $470,000, you’re going to make that offer anyway. The escalation clause allows you to have the possibility of maybe not having to go up to that full amount. Whereas, you know, the recommendation that we’re going to make often is, “Don’t leave money on the table.” If somebody gets it for $475,000 and you’re not going to be bummed out but if somebody gets it for $465,000 and you’re going to be really bummed out, we’re going to make the recommendation that you don’t leave that $5,000 on the table. So there are definitely pros and cons to the escalation clause, but it’s a tool that you want to have in your tool belt. And I guess, you know, that’s a segue into talking about all of these other offer strategy categories are going into knowing what it is that the seller is looking for. And that requires your agent having the capability of having a conversation with the seller’s representative and asking the right questions, hoping that

Ryan Neal: 23:06

Right, yeah. So, you know, one example that we often that agent is willing to answer those questions and to kind of pull out what it is that’s important to the seller, so that you can not just be competitive on price, but you can be competitive on some of these other things that are typically important to the seller. Back to, you know, splitting hairs, sellers have the ability to look at the other things that you’re offering above and beyond just the sale price and, you know, as a determining factor of whether they’re choosing your offer. So give us a couple of those examples. run into when we’re working with buyers who are making offers on homes is that the seller ideally wants to be able to coordinate their move out date from their current property, the one that you’re purchasing, into their new property. So oftentimes, that will entail a extended occupancy after close. And that’s something that we’re increasingly seeing buyers, incorporating into their offers. And it’s a factor that really sweetens the pot if you’re making an offer. And I think, you know, it goes without saying that it’s going to be more competitive if you’re offering that extended occupancy rent free, essentially.

Kip Lohr: 24:25

Right, right. And that’s becoming more and more popular with sellers, you know, to have a little extra time to be able to get moved out. Perhaps they’re relocating to another area and, you know, they’re purchasing a home that’s closing, and there’s a transition between the sale of their home and the purchase of their new home. They just need some extra time. And that can be a really compelling additional sales point. And, you know, kind of an extension of that is these situations where the sellers haven’t identified a new home yet, and for them to feel comfortable getting into contract and selling their home, they may want to rent back for an extended period of time. Most loans that you’re going to get are going to require occupancy within 60 days of close, which typically creates a backstop on the amount of time that you’re going to offer an extended rent-back to a seller. But if you could offer up to 60 days rent-back and like Ryan was saying, rent-free, that can be a pretty compelling pot sweetener to a seller.

Ryan Neal: 25:37

So I think oftentimes, buyers are getting into situations where, you know, they recognize that this is a very competitive market, and that they have to do everything possible in order to just be competitive. But sometimes we see buyers making compromises that perhaps are unwise, which can lead to significant issues later on. Would you care to go into some of those?

Kip Lohr: 26:01

Well, so for instance, waiving an inspection contingency. At LOHR Real Estate, our agents do not recommend that as a strategy. And the main reason for that is until you have a home inspection, you’re not going to really know whether or not there are some deal-killer expenses, you know, repairs that need to be need to be made. And, you know, an example of that could be that there’s a significant amount of water underneath the house that might require a French train be installed. And maybe it’s a $10,000 bill. And maybe that’s something that you can’t factor into your purchase and, you know, it might be a deal killer for you. More often, we’ll see foundation issues that could be $30,000 and $40,000 fixes, which kind of kill deals. So imagine if you waive and inspection contingency, you’re just kind of crossing your fingers that, you know, there’s not going to be any big-ticket items that pop up. Well, if it’s a $30,000 or $40,000 repair on a foundation, you’re going to still be compelled to finish that transaction or close that transaction. And your lender is going to require that the repair get done prior to close. And so, you know, that’s an example of one thing that we would not recommend as maybe a negotiation pot-sweetener, that is just too risky, in my opinion to to do.

Ryan Neal: 27:31

Yeah, so an alternative if you’re a buyer, you want to make a competitive offer, and you want to work the inspection into that, is the offering can be written in such a way that the inspection is for informational purposes only. So you still have the opportunity to back out of the transaction and receive a refund of all your earnest money, depending on what the inspector finds. So there’s that extra insurance. But basically, what you’re representing when you write an offer in that way is that you’re not going to ask for repair costs based on the findings of the inspection. And that may or may not be a good idea, but it’s a lot more palatable to you as a buyer than waiving the inspection contingency entirely. And it can be a significant plus in terms of how a seller sees your offer.

Kip Lohr: 28:15

That’s true. You know, another kind of category of risky negotiation techniques would be to waive the appraisal contingency. So real estate contracts in Oregon have a financing contingency which is automatically written into the agreement and includes the appraisal of the home having to be at or above whatever contract price you’re at. And so you might make an offer, let’s say the list price is $500,000, and you make an offer of $600,000, which is not unheard of in our markets, both in Eugene/Springfield and Bend/Redmond. And so you have made an offer that is, theoretically, significantly above what the the appraiser is going to come in at. And back to kind of the beginning of this portion of our podcast, we were talking about, you know, identifying what we think the current market value is and what a reasonable kind of stretch from that value an appraiser could come in at for the home. And then beyond that, it’s just kind of a crapshoot, right. So when you come in with an offer that’s waiving the appraisal contingency, you’re basically saying that you will come in with cash for any dollar amount above what that appraiser appraises the home for. So you need to be prepared that there’s a range of cash that will probably be required to come in above and beyond depending on what your offer ends up being. So where this can get tricky is, appraisals are just an opinion of value. Appraisers are professionals in the business at determining value for a home, but they actually don’t determine value. They give an opinion of value. Unfortunately, they’re not all created equal. And there can be a pretty wide gap between one appraiser’s opinion of value and another appraiser’s opinion of value. So it can get very tricky to rely on what an appraised value could come in at and could put you in a in a sticky spot as far as whether or not you have actually the additional cash to close. So it’s tricky.

Ryan Neal: 30:47

You know, oftentimes, buyers recognize it’s a competitive market, and the question comes up, is there is there anything that I can ask for as a buyer? You know, I think in somewhat distant past, it was a fairly common practice for a buyer to request that the seller pay for a home warranty, right, as part of the purchase, but that’s becoming increasingly rare. You know, another concession that buyers would often ask for is that the seller pay a certain amount of the closing costs. That can contribute to decreasing in the amount that a buyer has to pay up front. So that can make it much easier for a buyer to pull off a purchase on a particular home.

Kip Lohr: 31:30

Yeah, and it’s it’s really just boils down to how it affects the net to the seller. And so you can overcome a diminished net to the seller by simply offering a higher-priced offer to accommodate for those closing costs. Unfortunately, in this market right now, you’re likely to make an offer that’s significantly above the list price as it is, and already you’re going to run into trouble on whether or not it’s going to appraise out or not. You know, right now in this market, asking for concessions from the seller is kind of counter to putting yourself in the shiniest position to have a seller look at your offer and say, “It’s super clean, it nets me the highest amount of money, it nets me the extra goodies that I want. You know, this is a seller’s market. So really, all the concessions are going to need to come from the buyer side.” \

Ryan Neal: 32:27

So, I think one of the other elephants in the room, if you’re a buyer in this market, is if my purchase of this home is contingent upon me being able to sell my current property, then is there even any possibility at all that I’m going to get an accepted offer? Or, are sellers going to, you know, throw me off of the stack right out the gate, because I’m presenting a contingent offer?

Kip Lohr: 32:54

Yeah, and this is really situational. I would say that it puts you at a disadvantage a majority of the time. But each one of these transactions has a life of their own and a storyline of their own and demands that a seller is going to put on a buyer, or the amount of competition that you’re going to have. And so it really depends on the transaction. I mean, we’re currently in a transaction right now where, I think, there are four contingencies all lined up with each other on this one home that we have in contract. So it’s not unheard of, but it’s becoming harder and harder to convince a seller to, you know, hitch their wagon to somebody who has to sell their home as a contingency. You know, if your home is in a market that has the same pressures that our markets do, and you’ve got a, you know, savvy real estate agent and you’re well-priced, you’re going to be off the market quickly as well. So there are certain circumstances where it absolutely could be something that you could ask for.

Ryan Neal: 34:12

One other topic that I think is interesting to touch upon, as we’re covering what it takes to make a competitive offer is the practice of buyer love letters, which recently was banned by Oregon State Senate.

Kip Lohr: 34:27

Yeah, that’s true. And I think that that’s become almost expected for both buyers and sellers. From the buyer perspective, we’re going to write one and with the hopes that our compelling story of our cute family and our cute dog and cat are going to, you know, be the one thing that’s going to tip the scale in our favor. And sellers certainly have been accustomed to them, you know, prior to the Senate in Oregon banning them, It was already starting become, you know, a thing with both sellers and listing agents, who were like, “We don’t want a love letter; we’ve got 20 offers, we don’t want to have to read 20 love letters. And so don’t send us an offer with a love letter.” And so sometimes a love letter was actually going to hurt your chances rather than help your chances. But I still believe that, well, here again it gets back to understanding what it is that’s important to the seller. Say for instance, you’re a seller that has lived in your home for 30 years, you raised your kids in that home, you did a bunch of improvements to the home that you’re very proud of. And so you love that home and you’re just in a transition in your life, maybe you’re moving to another state or another city, but you know, in your heart, you want to see this very important part of your family go to a good family. And so you actually care. You know, that’s one of the decision-making factors for you as a seller, making sure that your home goes to a nice family, making sure that somebody is going to appreciate and take care of it. There are ways to convey that information to the seller without writing a love letter. So being able to have your agent have a conversation with the other agent and letting that agent know a little bit about your family and about your situation still can be a valuable tool in the tool belt in helping, you know, have your your offer stand out in a crowd.

Ryan Neal: 36:25

And it can seem a little bit sneaky, that you’re presenting the same information to the seller that you would have anyway if you were writing, you know, the love letter and submitting that with your offer. But the Oregon Real Estate Agency actually released explicit guidance stating that it’s completely fine for your agent to convey any biographical information about you as a buyer that they want to to the seller’s agent.

Kip Lohr: 36:48

That’s right. That’s right. So I mean, here again, I guess the takeaway is that in all of these different elements that can sweeten the pot for a seller, you need to be able to identify the things that the particular seller is interested in and the things that they’re not interested in, so that you don’t actually accidentally create a situation where you’re offering something that actually, they don’t want to see in an offer and that puts you at the bottom of the stack rather than the top of the stack. And, you know, back to relationships. For those of us who have been in in the business for a long time, we’ve developed close relationships with the other agents in our respective communities, and having a good relationship with other agents can become a determining factor in whether or not your offer gets accepted or not.

Ryan Neal: 37:40

Yeah, you know, if a listing agent is looking at 20 different offers, and you know, their brain is having trouble keeping track of what exactly distinguishes one offer from another, then totally, having that personal connection is huge, and kind of, you know, gets you to the front of their mind. And, you know, having them also be able to present to a seller that “Yes, I’ve worked with this agent before, we’ve had a successful transaction together. And I’m confident that what they’re representing about their buyer is true and that we can trust them.”

Kip Lohr: 38:08

That’s right, you know, it’s about the relationship. It’s about trust, it’s about being able to–they know that you’re going to be able to get the deal done. And that’s ultimately– all the different ways that you can convey to both the listing agent and the seller that you can get that deal done are going to go a long way towards putting you at the top of the stack. And that’s, you know, not to harp on this, but no detail is too small. Being prepared for all these different contingencies, having a team of professionals who are lined up and ready to go to go to bat for you is essential for being successful in this current seller’s market.

Ryan Neal: 38:51

So I think maybe, you know, we’re starting to run out of time. But I think maybe one final point to touch on in terms of the offer process is that one part of any offer is that it has a deadline, there’s a date and a time by which the seller has to respond in order for the contract to be valid. And there are some different strategies as a buyer that you can use to try to gain a little bit of extra leverage with the response time.

Kip Lohr: 39:16

Yeah, and it can be a double-edged sword, for sure. And here, again, it’s going to be very situational; it’s going to be dependent upon the relationship between the two agents. And here’s where there’s a little bit of trust that has to be thrown the other way, where, you know, your relationship with the listing agent and the information that they’re giving you, you feel like you can, you know, create a little bit of a pressure point. And so, why would we use response time as a lever in the offer process? And the answer to that question is you have the best shot at getting a successful contract if you can eliminate competition and prevent this from being a multiple-offer situation in the first place. And so there may be a situation where you can present, verbally, a compelling enough offer to the listing agent, with the caveat that I need a response time that basically says, “Look, I’m going to beat everybody to the punch, I want you to accept my offer now. And if you don’t, then I’m not going to send you an offer. And I need a response, that’s going to be very quick so that we prevent other buyers from getting into the game.” And that strategy actually works sometimes. In fact, we are in contract right now on a property that’s going to close next week where we came in guns-blazing with a super-aggressive offer with an agent who I have done a lot of business with and know very well, and she knows me very well. And we put together a deal, you know, verbally, before we got it into contract. And we made it contingent upon this being a very, very quick response time from the seller, and the seller was thrilled, and our buyers were thrilled. And, you know, that’s an example of a time when it actually works. It’s kind of very similar to some of these other strategies where it may work under some circumstances, like an offer contingent upon the sale of your home. But it’s certainly not something that is going to work a majority of the time.

Ryan Neal: 41:32

Yeah, it takes some real discernment. I mean, with all of these different facets, it’s really–something that separates a skilled agent from a less skilled agent is the ability to kind of tease out these different factors, you know, what’s important to the seller, what’s kind of important, what can maybe be dispensed with. And, you know, how is that influencing the construction of an offer, which taken together as a whole, all these different pieces are going to create a picture which is very compelling for them.

Kip Lohr: 42:01

Yeah, and I guess the the general takeaway here is twofold. You need to have a robust team in place to help you get through this process successfully. And you need to understand that there are many, many minute details that need to be taken into consideration before you even get to the offer stage. Hello, and welcome back. We are almost done with this week’s episode. Before we leave you, we are going to do another installment of Kip’s tips. And this week’s tip is–buyers should choose the escrow company when they are writing an offer. Traditionally, this would be something that the seller would have chosen. It’s really just been a custom over the last several years and not really a hard, fast rule. So let’s let’s look into why it’s important for buyers to choose the escrow company. So not all escrow and title companies are created equal. So you definitely want to be working with a company that is recommended by your real estate agent and well respected in the community. And in real estate, it’s all about relationships. And so leveraging those relationships to problem-solve in the middle of a transaction is really important. And you’re going to be interacting with the escrow company throughout the entire transaction. So there’s going to be a lot of interaction back and forth between the buyer and the escrow company, which is not really true for sellers. They generally have an initial contact from the escrow company, and then they don’t hear from them again until it’s time to sign at the end of the transaction. So it’s really important for you to be working with a company that you’re going to be able to trust and be working with you throughout the entire transaction. Your lender is going to be interacting often with the escrow company as well. So it’s really important to have a company that, here again, allows you to leverage the relationships of your agent and your lender. Hopefully, they’ve got a great relationship with the title company, and they’re just going to stay on top of things for you. And you may have scheduled a vacation–I know it sounds nuts, but I have had lots of clients write an offer on a home and then go on vacation, and be gone during the time that we’re supposed to be closing and signing. And so you might be on vacation or you might be relocating from out-of-area. And that title company is going to need to set up a mobile notary and arrange for the signing and make sure that the documents are back to the lender in a timely fashion so that your transaction can close on time. So here again, you want to make sure that you’re working with a title company that’s going to be really on top of things and Johnny-on-the-spot. And then you know you’re going to be signing your life away, or feel like you’re signing your life away. That’s on the buyer side. When you’re getting a loan, there are an extremely high number of documents you’re going to be signing in comparison with the seller. Having the escrow officer be there for you to answer any questions and just help you along through the process is really important. So you want to negotiate getting your escrow agents working for you. And that’s it. We’ll see you next week, everybody.

Voiceover: 45:20

Thank you for joining the Revolution. We are over and out until next week, when we’ll continue to fill you in on all that matters most in our local Bend and Eugene real estate scenes. See you next time on The Real Estate Revolution.