Real Estate

Real Estate Matters

Reality check: bidding wars and all-cash buyers

by Hadar Guibara

If you've been in or around the homes market in Palo Alto during the past couple years, you've probably heard about the intense bidding wars brought on by too many buyers and too few homes up for sale. What you may not know is that a large percentage of sales are closing with all-cash buyers, many of whom have considerably more liquidity than they need to land the home they're interested in.

For these and other related reasons, the first question on the minds of home buyers looking at Palo Alto properties shouldn't be "What's the list price?" but rather "What's the home worth to me?"

This question is important, especially if you plan to go into a deal carrying a loan and all its complexities. Home sellers like cash offers, and they especially like offers -- cash or otherwise -- for more than the price they listed their home for. In asking yourself how much a given home is worth to you, your answer will give an indication of whether or not you have a chance at it.

In a bidding war, know the lay of the land

All other conditions of an offer being equal, many homeowners will sell to the highest bidder. Others frequently go with the best cash offer, because it makes the process so much more simple and less risky for them. There is a growing number of buyers looking at Palo Alto homes who are prepared to pay cash, as evidenced by the following figures.

In the first five months of 2013, of the 145 properties sold here, 38 percent were sold for cash. Through the end of May this year, 133 properties were sold with 42 percent of buyers paying cash. These figures indicate a trend, but whether or not you're able to pay cash, here is a very good piece of advice:

Make your first offer your very best offer!

People choose to buy a home in Palo Alto for many reasons other than just the home itself: friendly neighborhoods perfect for families, quiet streets, top-rated schools, the best shopping and entertainment venues all within an easy drive, walk or bike ride. And don't forget overall lifestyle and pride of ownership.

So when determining what you'll offer for a home, consider that homes in this market are selling for considerably more than their list price. In the first quarter of 2014, Palo Alto properties sold for an average of 10.1 percent above what they were put on the market for. That's up from 7.5 percent for the same time period in 2013 and 2.9 percent in first quarter 2012. Understanding this trend, making your first offer the very best one you can isn't only logical, it's mandatory.

What sellers want and how to give it to them

Many factors come into play in buying a home in Palo Alto today. Starting with a strong, solid offer is a powerful first step in showing the seller that you're in the game to win. Other things that can influence sellers include:

* Having as few contingencies as possible in the offer

* A large down payment (if you plan to secure financing)

* Access to relevant personal information about the buyer

* Working with a buyer's agent who knows the neighborhood and has been successful in placing his or her clients in similar type of homes

* Buyers who demonstrate integrity and seem to be good fits for the home and property.

All combined, these strategies for buying a home in this tight seller's market can get you into the home of your dreams quicker than you imagined.

Hadar Guibara is a Realtor with Sereno Group of Los Altos. She can be reached at hadar@serenogroup.com.

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