Question: My Agent is Recommending I Bid $100k Over asking, what should I do?

Dear Buyer,

 

Focus on the current pending transactions. Ask your agent, what they went for, how many offers did they get, and take a look at the trend line. We're seeing each successive sale being higher, by $5k, $10k, $15K, $25k... We're also seeing what we haven't seen since the go-go days, which is the zero-zero-zero offer.

Zero days to remove contingencies
Zero days to remove appraisal contingencies and
Zero days to remove loan contingencies.

Yes! It's come back to that non-sense. Fortunately we are not seeing a repeat of what made the market blow up last time, which was free money loans (Stated Income loans). The market crashed because the money lenders finally figured out that it wasn't such a good idea to give money to people who could never afford to pay them back.

The good news is that today's buyers are for the most part qualified buyers. They have to prove they can qualify for the loan. Also the folks winning the deals are those with the ability to take an appraisal variance, so these buyers have skin in the game. I say for the most part they are qualified, some are not in my book, I would never lend money with a Debt to income ratio of 45%. If you are spending 45% of the gross income on housing that is insane. I don't know why banks allow it.

However, the only thing that can deflate this market is if the supply spigot were to start gushing homes or a major recession were to occur. At some point we'll get more supplies, and I think it'll come from older home owners deciding to leave the Bay Area to retire somewhere cheaper. As prices are quickly rising to the housing bubble peak, this change will start to happen this summer and more the next couple of years. As I don’t' expect this to be large scale, I don't expect to see a buyer's market again however until the next recession, which we can't predict.

Only an irrational buyer can succeed in buying in this market, but as the trend right now is towards a higher price, and no one can predict the cause of the next major depression, buy today, for you should be rewarded tomorrow.

Sunil Sethi
Sunil Sethi Real Estate

 

- Sunil Sethi

 

SUNIL SETHI REAL ESTATE


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