Green Ink and Multiple Offers: It’s the end of the buyer’s market in San Carlos…

We have hit the bottom…

There…I said it.

Call me crazy, or foolishly optimistic, or blind (or all three.)   I have resisted joining the drum beating of others who have been saying all summer “NOW’S the best time to buy!”  But my answer to the often asked question “When will the real estate market hit the bottom?” has always been when:

1. We start to see multiple offers on a consistent basis, AND
2. The green ink makes its return to the Weekly Review…(translated:  Homes start to fetch more than asking price.)

Well sports fans, based on that definition, we have found the bottom of the market in San Carlos.   And this means that as quick as a flash, the control that had been in the hands of the buyers has been cruelly ripped away by the sellers.   The brief “buyer’s market” we had in San Carlos is over…for now.

It’s NOT 2005 again.

This doesn’t mean that every house is going to start flying off the market.  Homes that are in lousy condition and are over-priced aren’t going to sell.  They didn’t back in the super-heated market of 2005, and they won’t now either.  But in the past couple of weeks, we’ve seen an absolute stampede to buy attractively priced homes that are in good condition.  Multiple offers are almost becoming commonplace again — two listings were just on the market up by Highlands Park both got multiple offers (both listed in excess of $1M) and Dave Blewett’s listing at 145 Beverly Drive proudly proclaims that it sold with multiple offers.   And believe me, there will be more.

The bottom is a process, not an event…

Finding the bottom of a market is like watching a jumbo jet land — it will bounce off the runway a couple of times and then roll for a mile or so before it ultimately starts its journey upward again.  Right now, we’re feeling one of those bounces in the real estate market.  Does this mean all is good and prices will start to climb again?   If I had the answer to that question, I wouldn’t be here right now.

Much as I’d like to forget about it, we still have double-digit unemployment to contend with.  And there’s strong evidence that there’s another wave of foreclosures coming to the area.   Hard to say how this surge of inventory will impact the market.  But for now, if you’re shopping for a home in San Carlos, you need to change your mindset.  Now.

“Same as it ever was..”

That line in the great Talking Heads tune is fitting for where we’re at right now in San Carlos.   Remember how it was just a year or so ago when you got that new-listing alert in your email inbox, or when your “plugged-in” agent called you about a hot new home that hit the market — and you had to go see it that very night?  Well, we’re almost at that point again.   Some of the hotter listings are only on the market for a few days.  That means if you wait until the open house, you’re either too late, or best case you’re days behind your competition.  That could be the difference between winning the home, or continually missing out.

So keep an eye on the upcoming San Carlos Real Estate Week in Review posts.   If the short days-on-market (DOM) numbers and the green ink stick around, then you can safely assume we’re at the bottom.

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The FAQ’s on Counter Offers

Few elements of a real estate transaction are more confusing and widely misunderstood than the Counter Offer.   And it can be even more mystifying when you consider deals where the seller is countering more than one offer.    In reality, the concept of the Counter Offer is pretty straightforward, but its implementation in a real estate contract is where most of the confusion occurs.

Why is this important?  Regardless of whether the market is hot, cold or somewhere in between, the Counter Offer is the main tool when the two parties negotiate the terms of the contract.  Therefore it’s important to have a good understanding of what they’re about.  I put together some of the most frequently asked questions (FAQ’s) that I have encountered regarding Counter Offers, and outlined them below.  For the sake of this clarity, assume that you’re a buyer and you have just made an offer on a home.  Obviously, the answers here are relevant for both buyers and sellers.

FAQ #1:  We submitted an offer on a home, and the seller countered our offer.  Does that mean he can only deal with us now?

• No.  The seller is free to entertain other offers while you are considering his counter.  In fact, the seller can accept another offer even while you’re mulling over his counter.  So if you sense there’s lots of interest in the house you’re bidding on, you probably need to make a decision sooner rather than later.

FAQ #2:  We received a counter-offer from the Seller, but we’re not going to accept it.  Are we still obligated to buy the house per the terms of our original offer?

• No.  When a seller counters your offer, he is effectively canceling the original offer and re-submitting a new one.   If you decline his Counter Offer outright, you have essentially killed the contract.  Note that you can write a Counter Offer to his counter, which has the same effect — he is no longer obligated to sell the home to you per the terms of his counter offer….and so on, and so on.

FAQ #3:  Is there any limit to the number of times the buyer and seller can counter each other?

• Nope.   I have heard stories of deals that had 12-14 counter-offers before the deal was settled.  I can’t imagine what in the world they were haggling over for that many rounds of negotiation!

FAQ #4:  We just signed the seller’s Counter Offer with no changes!  We’re now in contract, correct?

• Not yet.  The Counter Offer is not binding until the maker of the Counter Offer is “notified” of acceptance  (in this example it’s the seller or the seller’s agent, if that’s specified in the contract.)   This is a VERY important point!  In effect, the seller can still accept another offer right up until the moment that he receives your accepted Counter Offer, even if you technically signed it before he received the other offer.  In reality this happens rarely, but it’s still possible.  “Proof of Notification” is absolutely essential.  So, if you’ve signed the counter offer, any good agent knows that it’s best to immediately hand deliver it to the seller and get a signed acknowledgment of receipt.

FAQ #5:  The seller received multiple offer on his house.  Can he counter more than one of those offers?

• Yes.  This is what is referred to as a Multiple Counter Offer.  Multiple counters are a bit more involved, and you’re more likely to encounter one in a hot market when a seller thinks he can leverage one interested offer off of another to garner some additional money.   They are also very risky, because for the reasons we discussed in Question #2, the seller can easily go from multiple buyers to none if they don’t bite on the counter offer.

FAQ #6:  Two counter offers were sent back to the buyers.  What happens if they both accept? Isn’t this like selling one house to two parties?

• No, although that’s certainly what it seems like.   In this situation, the contract is not binding until the seller signs and acknowledges the winning offer.  So even if you sign the seller’s Counter Offer without any changes, the seller still has the right to reveiw and choose which offer he or she will go with.   This is clearly stated on the contract that is used for multiple counters.  So like we discussed in Question #4, it’s vital to get that acknowledgment and signature from the seller.  If you’re interested in finding out more about multiple counter offers, here’s a great article by Dian Hymer of Inman News:  The Pros and Cons of Multiple Counter Offers.

I hope these questions and answers help steer you through the sometimes tricky waters of Counter Offers.  Remember that the majority of real estate transactions involve at least one or more rounds of counter offers, so don’t be put off or intimidated by them.   Look at it as a tool for two interested parties to reach common ground in a very important transaction.