The reputation of Portland’s real estate market often precedes itself. In many ways, the market is as it appears – we have historically low inventory (if no new homes were listed, our inventory would be depleted within two weeks), housing prices are rising, and there is a large buyer pool fueling an overall competitive environment. All of this can land as fear in the heart of a hopeful buyer and spur reasonable questions:
Will I be forced to take uncomfortable risks in order to have my offer accepted?
If I buy in this market am I at risk of paying over market value?
Will I be able to compete?
Is now still a good time to buy?
What should I expect from real estate representation?
The answers can be nuanced and unique to each individual person, but one thing we aim to inspire in all buyers is empowerment around choice, rather than a “when the competition says jump, you say how high,” mentality.
Will I be forced to take uncomfortable risks in order to have my offer accepted?
It’s true that there will likely be scenarios where competition is fierce and what it takes to win a home may stretch a buyer’s comfort. But this should always be viewed as a question mark (Is this the home to fight for?), rather than a demand. We want to nurture a foundation of security by way of education, supporting buyers in honing in on and prioritizing goals, and setting clear expectations so when “the one to fight for” does come around, buyers can respond with less reactivity and instead can feel rooted in their well-rounded understanding of the market and commitment to their own individual needs. Our ultimate goal is aiding buyers in honoring the right decision for them.
If I buy in this market am I at risk of paying over market value?
Often market value is conflated with appraised value. In short, market value is determined by how the market responds to a home. This is the amount buyers in the market are willing to pay. Appraised value is a bank’s assessment of risk. There are times when these two numbers are farther apart, which is often the case coming out of winter when early spring sales have not yet closed and the less fervent winter market is providing the bulk of the comparable sale stats for appraisers. This can also be the state of things when an influx of buyers outpaces rising home values – or in other words, population growth and demand are moving at such a clip that appraised values seem to be one step behind. Consequently, we are seeing appraisal gap coverage (the willingness to pay the difference between the appraised value and offered price) become increasingly commonplace within offer terms. When a buyer is bridging an appraisal gap, they are paying the same price they offered for the home, but are taking out a lower principal loan. In essence, the cash to close is higher and the loan amount is less.
Will I be able to compete?
We never want to squash dreams, but we try to arm buyers with realistic expectations. The fact is that aggressive offer terms do exist in the marketplace: variations on partial or full appraisal waivers, inspection waivers or limitations, earnest money releases, etc. These decisions are at each buyer’s discretion and if one or all of these terms do not feel comfortable, it is still important to know what you could be up against. It is also important to keep in mind that even in a highly competitive market, there is still opportunity and often buyers end up purchasing homes in scenarios that are compatible with their level of willingness to compete.
Is now a good time to buy?
It can be heartbreaking when a buyer feels as though they are chasing the market. The reality is that rising housing costs have priced some first time homebuyers out. Often, buyers that have stepped away and are now returning to the market are faced with the question: Do I adjust my expectations around what kind of house I can buy with the money I have or do I no longer want to be a buyer in this market? We want to counsel buyers away from the experience of chasing a unicorn only to emerge disappointed months later. For many buyers, kicking the door down, getting into their first home, and beginning to build equity will take precedence and expectations will adjust. Others will determine that stepping away from the market serves them more. Both are valid choices and both decisions come with their own risks. Investing in real estate has always carried some uncertainty and although many signs point to continued value increases for Portland’s homes, the bottom line is we cannot predict the future and the weight of investment risk is not one size fits all.
What should I expect from real estate representation?
Counsel – No matter the archetype of the buyer, this is an important and emotional process. Finding an agent that hears your needs and adds value to your process is imperative.
Honesty – Your agent cannot pick your home for you, but they can frame realistic expectations on what type of home you should be targeting for success. This process should be educational and interactive. No matter what we hear at the water cooler or from trusted sources, there is NO better way to understand than to be directly and actively involved in a process focused on your needs.
Negotiation – Getting an offer accepted is not based on price alone. There are many components to an offer that add strength. Having an agent who understands this and can educate you is critical in this seller’s market. Our team spends a lot of time preparing and educating you on the process so that you are ready to act fast and have had time to evaluate what tools are safely at your disposal.
Presentation – Crafting the right offer is complex, but the presentation is just as critical as the terms offered. Our team has a stellar reputation in the Portland marketplace, and we have earned this by working at a high level of integrity and with respect for the co-brokers we get to work with. The presentation of your offer sets the tone for the entire process and we want the first impression of your team to be as leaders of the industry.
Just three days later, my hair whisperer called to say they were on their way to an open house, “to check it out”. It was love at first step. The 117 year old home had original leaded glass, wood floors, remodeled bathrooms and kitchen, and a front porch with roses creeping over the railing. I looked through the listing details and spoke with the listing agent to determine what offer terms would be meaningful to the sellers. I also put together a report of recently sold comparable homes to determine price, and worked with my buyers’ lender to be sure we were putting together a plan to succeed. My buyers weren’t the only ones who loved the house: by Sunday afternoon there was an offer deadline, and we ultimately competed against three other offers.
Today, exactly four weeks after my hair cut, we closed on their ‘dream house’. On this rainy fall evening, my buyers unlocked the door for the first time to begin a new era in the neighborhood they love, with the bigger, character-filled home they didn’t think was within reach.
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