It's true...the Colorado market is moving quickly right now, with many multiple offer situations, in a broad range of price points. It is not always the case but it is more frequent right now, and happening throughout the Front Range. This can be attributed to the very low interest rates & that there is less inventory entering the market than what is going under contract. The pandemic may also be playing a role.
HOW YOU CAN PREPARE:
1. Get Ready...Clearly define your financials. What will your down payment be? What will your loan amount be? Have your pre-approval letter ready to go when you start to look at homes. When you fall in love with a home, you don't want to waste precious time scrambling for your financial information for negotiating.
2. In preparing to compete in this market, I suggest anticipating multiple offers and in these situations, offers can go over asking price by as much as 10% (at the moment).
3. Prepare financials for this by looking for properties that are under your target price range by 10% so that you can negotiate. You will still find a great quality home while being able to negotiate. Buying power is still strong with the low interest rates, which is to your advantage. 4. There are other negotiations that can be done as well to strengthen offers such as appraisal gaps, paying for title, and more. A great real estate agent can help you on what and how to negotiate with their understanding of the current trends in negotiation.
5. Have a bit of extra cash reserved in case of negative appraisal gaps which will help you negotiate to win the contract.
What is an appraisal gap?
This is when a property appraises for a different amount than the contract purchase price. If the property appraises for less than the contract purchase price, the mortgage will only loan up to the appraised value. That's when having extra cash reserves saved to cover any gap that the mortgage company will not finance.
While I do not have a crystal ball, I do anticipate the fall to be less intense while still having low interest rates and will be a great time to be looking.
What is buying power?
Your buying power is comprised of the total amount of money you have available each month for a mortgage payment. The drop in mortgage rates really increases clients' buying power. For example, the principal and interest payment on a $400K loan at 4.5% (rates from over a year ago) is $2026.74. The principal and interest payment on a $400K loan 2.875% is $1659.57. So, technically a client at 2.875% could increase their loan amount by nearly $100K and have the same payment. This is pretty powerful if you think about it! That could be a nicer neighborhood, an extra couple bedrooms maybe…or a larger yard.
If you have any questions about the Boulder County Real Estate Market, reach out to me via the contact link here. At 8z Real Estate, we follow the market data and trends, and have the knowledge and local market strategies to best assist you in your real estate goals.
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