Monday, June 21, 2021

What buyers need to know about escalation clauses

 


An escalation clause can help buyers gain a crucial edge in today's seller's market, but these offer addendums need to be handled with care. What is it? An escalation clause is a real estate contract, sometimes called an escalator, that lets a home buyer say: “I will pay “x” price for this home, but if the seller receives another offer that’s higher than mine, I’m willing to increase my offer by “Z” to “Y” price. Just be sure you have the cash to back up the offer. 

How does an escalation clause work? While escalation clauses vary significantly, the general escalation addendum has a few basic components:

             What is the original offer of purchase price?

             How much will that price be escalated above any other competitive bid?

             What is the maximum amount that the purchase price can reach in case of multiple offers?

For example, buyer Brown offers $100,000 for a home or piece of real estate. Her Realtor® adds an escalation clause that, in the case of a higher competing offer, will increase Brown’s offer in increments of $2,000 above the competing offer.

Her escalation clause goes up to a maximum of $110,000. If no other offers are submitted, Brown’s offer remains at $100,000.

If buyer Green offers the seller $103,000, then Brown’s offer would automatically escalate to $2,000 above that, bringing Brown’s offer to $105,000. If buyer Orange offers $111,000 for the home, then Brown’s maximum of $110,000 will be exceeded, and Orange will have the top offer.

Will the seller accept an escalation clause?

Some home and real estate sellers simply state that they will not accept an offer with an escalation clause. They would prefer that every buyer submits exactly what they’re willing to pay for the home or real estate.

Sellers sometimes prefer this method, because it motivates buyers to outbid one another on the first try. It also streamlines the contract paperwork and the decision-making process.

Will there definitely be multiple offers? Almost always in the 2021 market so far. Some folks hate to put all their cards on the table upfront- Yes, I get that, but in the market, it does help the seller select the best offer.

Escalation clauses should only be used when the buyer is fairly confident that there will be multiple offers, or when the buyer expects to pay an increased price.

Buyers who submit an offer with an escalation clause are laying all their cards on the table: The seller knows immediately how far the buyer will go to secure the home. If that offer ends up being the only offer submitted, it technically remains at its original price.

A Realtor representing the seller will know, however, to counteroffer to the buyer at a higher, escalated price, since the buyer is clearly willing to pay more. While there’s no guarantee that the buyers will agree to the higher price, it is likely that they will.

A buyer gives up a lot of negotiating power and potentially leaves money on the table when using an escalation clause that goes unmet by a competitor. The only protection they have is the appraisal, and if they chose to waive that, too—they are agreeing to the price no matter what… so be sure you can come up with all the extra money before adding this clause.

Has the seller’s agent clearly stated a one-day review or multiple rounds of offers? In hot real estate markets, a wide variety of offer-review processes can be available. Some might specify, for example, that the property is going on the market on Friday, and that all offers will be reviewed the following Thursday. The sellers and their Realtor will make a final decision that day.

This situation can be ideal for the escalation clause, when a buyer knows it’s an all-or-nothing offer. Other sellers take a back-and-forth approach.

They may collect offers from buyers for one week, and then respond to a handful of the best offers by saying “Send us your highest and best offer.”

This technique is particularly disliked by many consumers and professionals for its lack of clarity, but it’s important to know that it exists. Before writing an offer, a buyer’s Realtor can inquire to feel out the details and make sure the buyer is prepared for the situation.

Writing an escalation clause on the initial offer in a multistage situation could put the buyer in a weak position during the second round. It’s perfectly legal for a seller’s Realtor, with the seller’s permission, to reveal to all potential buyers what the top initial offer is and to ask everyone to beat it.

In this case, the escalation clause would reveal that buyer’s maximum, losing a competitive edge.

Bid with careful confidence, and know that each situation is unique

If you’re considering an escalation clause,  The Realtor’s knowledge of normal practices and probable outcomes in your market will make your offer much more likely to succeed. They will help you see what the downfalls are and explain any advantages. Buyers shouldn’t be tempted to escalate their purchase price above a figure that they would be comfortable paying. At the same time, they should realize if inventory and interest rates are low that aggressively pursuing a good home at a good price is necessary to winning in a competitive market.

Escalation clauses can cause a lot of stress for home buyers, but when they’re boiled down to the basics, they’re fairly straightforward. Remember to be realistic, to be comfortable with how much of a competing bid you’re willing to offer, and to confidently go after a piece of real estate at that price.

Potential buyers who are only looking to get a steal often end up not being buyers at all. With the way homes are going up in value in 2021-- 2 months of looking for a home could potentially cost you $10,000- $20,000… so some buyers are taking that value on at the time of the offer, to hedge their bet. But bottom line, the only protection the buyer has in this situation is the appraisal. Now, that could bite you too- as what if the appraisal come in low—will you have the cash on top of your down payment to make up the difference?  So just tread carefully and know what you are getting into- before you jump in!! 

 Want to know more, Contact Team Beery and we will be happy to help you navigate the in’s and out’s of this market.   

Sunday, May 9, 2021

How to pass a home inspection

THINGS YOU SHOULD KNOW TO HELP PASS A HOME INSPECTION AND AVOID DELAYS

HIGH COST LAST MINUTE TRAPS YOU SHOULD KNOW ABOUT WHEN LISTING A HOME


*Utilities are on the day of the inspection - water, electricity, gas, etc.

*Lock box codes or arrangements are provided to access the inside of the property before the day of the inspection

*Grade or surrounding surfaces slope away from the house foundation on all sides

*Exterior surfaces – driveway, walkways, porch, patio and other accesses are not cracked with significant separation or displacement

*Vegetation is trimmed or planted away from the house foundation, wall surface and roof cover

*Exterior trim building material is free of deterioration, rot and sealed to the wall surface.

*The roof covering has been serviced within the last 3 years and has no obvious damage

*Exterior windows are not cracked, vandalized or missing and seals are functional. 

*Water heating tank does not have visible corrosion or staining at the unit, pipe connections and surrounding area.

*Sinks and faucets do not leak underneath and there are no indications of earlier water damage inside a cabinet or wall

*Waste pipes at sinks, tubs and fixtures have functional drainage. The shower door is not leaking. No obvious leaking on drywall around tubs or toliets. 

*Kitchen appliances are functional and installed properly. There is a high loop on the dishwasher. 

*Electrical outlets, wires and connections are concealed and secure. Outside outlets are properly covered.

*Heating and cooling systems are operational at the controls and serviced within the last 1 year.

*Interior walls, ceilings and floors are not cracked with significant separation or displacement

*Attics are insulated with an adequate cover. 


*****The information provided is educational. A Home Inspection should always provide an unbiased evaluation.******

For more information,  contact  Team beery at www.TeamBeery.com

Thursday, April 15, 2021

April Market stats

**April's Monthly Market Update 

Active Listings have decreased by 70.2%.

Listings Under Contract have increased by 29.6%. 

Monthly Median Sales Prices have increased by 18.1%. 

Closed Sales are up by 16% 

This is all due to the current lack of supply on the market which is now at 0.4 months. 

WHAT DOES THIS MEAN TO THE TYPICAL HOMEOWNER???

NOW IS THE TIME TO SELL YOUR HOME!!! We have a program that allows you to buy your next home without a contingency.  Just ask us about it! 

*Buyers:
With 54% of all sales closed over asking price so far in April, the average sale price per square foot is now higher than the list price for every price range up to $1M. In a balanced market, homes typically sell within 97% of list price; that percentage is now 101%. This means that, for the past month or so, the majority of list prices have been the starting price for where negotiations begin instead of a top price to work down from. In past extreme seller markets, $5,000 over asking was typically enough to win a contract; that was true last year as well when the market took off. However, last January the median over ask was $6,000; by February it was 10,000; in March it was $11,000; and so far in April it’s $15,000. 

 **By price range, over 62% of homes listed between $250K-$400K closed over asking price; the percentage is 54% for sales between $400K-$600K; 47% between $600K-$900K; 30% between $900K-$2.5M; 9.5% over $2.5M.
 Putting an offer in over asking price may cause a buyer some anxiety, especially a first-time home buyer. The median sale price is now $360K. Since January, the sales price per square foot for a home between $300K-$400K has appreciated 6%. That’s approximately 2% per month and the current sale price to list price ratio within the price range is 102.4%. If this rate of appreciation continues in the short term, a buyer who paid 4% over asking price on a $360K home ($14,400 over) would recoup their investment through appreciation in approximately 2 months.

If you need to know about a community or more specific  information- contact me or my team!!

Outdoor Structures Make enhance your backyard!

 


Although it’s barely spring, summer is right around the corner. And nothing says summer like better outdoor spaces to play and work in! Now is the time to plan and install outdoor structures so you can spend the hottest days of the year taking advantage of the breeze and shade, while still being able to spend time in the great outdoors.

A Short List of Outdoor Structures

Outdoor structures offer endless possibilities when it comes to sizes, shapes, construction materials, and intended uses. However, there are a few that are hardcore backyard staples, to the point that some might argue a home is completely bare without them. Of course, the outdoor structures you choose will depend greatly on how you use your home, but here’s a short list to get you started.


  • Patio covers. Already have a patio, but the sun’s putting the kibosh on your outdoor plans? It’s time for a patio cover. These very simple structures are essentially a roof for your patio, designed to seamlessly marry with your existing rooflines and structures. If a permanent roof isn’t possible, consider adding a shade sail, which can provide a great deal of shade with very little cost or maintenance.
  • Pergolas and trellises. Looking for a fancy place to run some plants for natural shade with the added benefit of flowers, fruits, or foliage? Pergolas and trellises provide spaces for plants to climb, as well as providing broken shade throughout the day. The tighter the construction, the more shade you’ll have, but if you plan to train vines on your structure, leave ample room for growth.
  • Decks. Of course, not all the best structures are aerial. There’s absolutely nothing like a nice deck. You get all the benefits of sitting outside without all the mud, grass, and bugs. What’s not to like? Decks allow for a lot of creativity and customization, too, with common add-ons like benches, fancy railings, and multiple levels to create even more interest.
  • Screen porches. If you already have a deck or a patio that you like, and a roof on it, you can easily convert it to a screen porch with a few weekends’ worth of effort. With a screen porch, you can still enjoy the great outdoors, but without having to worry about stinging insects or debris that may be blowing on the wind.
  • Gazebos. Looking for a freestanding structure away from your house? A gazebo or shelter may be a good choice. These largely open buildings feature a floor and a roof, and not a lot else, making them ideal for shady spots or poolside buildings. Hang a hammock inside and you’ve got the ideal summer relaxation spot.
  • Recreational sheds. By now, most of us have heard of the “she shed,” but freestanding recreational sheds can be hideouts for anyone. Not a garage and not a house, a freestanding shed is a structure that allows you to create any kind of year-round space you can imagine. Add electricity and a heater, and even winter’s chill is no match for your outdoor studio space or reading room.
  • Greenhouses. If you’ve got a green thumb, a greenhouse may be the perfect addition to your garden space. Even a small greenhouse structure will give you more room for plant-based experiments and somewhere to house your sensitive plants through the cold of the winter. Be sure to choose a model with excellent ventilation!
If you live in a HOA community, make sure you get their permission before constructing one of these up, just so there is no issues down the line.  

Do you need more information about if there is a value to adding these to your home, contact us at Team Beery 602-644-1416  


Wednesday, March 24, 2021

Spring promises an exciting season in housing


 March of 2020 saw the new spring market grind to a halt as COVID-related shutdowns and fear swept the country. Subsequently, real estate agents and brokers developed new and innovative ways to serve clients in the process of buying and selling their homes, paving the way for one of the most active and extended market recoveries in recent memory. Now, as the 2021 spring market gears up, it is a good time to think through your preparations to ensure that you are ready for what lies ahead. In the Phoenix market we never slowed down, so this spring seems like an extension PLUS of 2020. 

As you prepare, here are the things you need to know to make the most of what promises to be an exciting spring selling season. 

Technology is still essential

The adoption of new platforms and processes allowed real estate professionals to continue to serve their clients throughout the darkest days of the pandemic. For many clients, there is still an expectation that virtual tours and contact-free transaction management will be widely available.

While some markets have seen successful vaccine rollouts, others are still limited in the amount of contact they are allowed. Here in Phoenix all the COVID safe practices are making the most of your online and mobile platforms to simplify and streamline transactions and provide optimal client service.

Low home inventory continues

While some homeowners are motivated by rising home values in their area, others who are looking to sell and then buy are holding on to their current homes and waiting for a more buyer-friendly market. This is a good time to explore new home communities- but know there are challenges within this market as well in Phoenix.  As an option for hopeful buyers are slim you can ramp up your geographic research to make sure you know exactly what community is right for you.  My team has had good luck then identify potential sellers in the area you like.

Focus on what is important to you

If being close to schools or a freeway access is what you must have, make sure your search reflects that.  Sometimes a broad search can help when you are just wanting to compare what your money buys in different cities. Our team can help you narrow down your search so you can have  a lot of confidence in finding just the right home/ condo for you!  

Prepare for negotiations and multiple offers

Many buyers have hit a wall with scores of rejected offers and the frustration that comes with dashed hopes. In addition, sellers may be reluctant to negotiate even minor points in the face of multiple offers over asking price. Hone your negotiation skills to enhance your chances of scoring the right home. Keep in mind of the time you plan to stay in the home—sometimes in this market over paying to get the home, will pay off because of the features or location of the home/condo.  

I am telling my buyers right now- there may be a few no’s we will get told, but I know we will get the yes on the right home!  

If you need any help navigating selling your home to buy another, we will help you through this with the least number of bumps in the road. So remember to call the “Beery Good” Team 602-644-1416


Monday, February 22, 2021

What value does a REALTOR have in today’s market? Why use a REALTOR?

 


When you think of a REALTOR, what do you think of? Lately We are hearing overpaid, a rip off-- this saddens us as there is a Very Big Difference from a REALTOR and anyone who is licensed to sell real estate in my eyes. There is so much talk about value and what we do or don't do for the public. It is hard to see the differences or what is the benefits of using a Full Time- Full- Service REALTOR.  WE think of negotiating and building relationship, protection for our clients, working hard, educated to what is happening around a specific area and the pitfalls to know about, helping people every way WE can. We think of helping you get to your Whooo hooo!!!! moment, quickly, efficiently and navigating all the obstacles that can be in your path!


 Yes, you can sell your home yourself, use a discount brokerage, or hire a agent/a broker not associated with NAR with the designation of a REALTOR. So why does it matter? What difference does it make? REALTORS have taken an oath and are held to the code of ethics from NAR(National Association or Realtors); they give you a Protection from what you do not know and will guide you to make educated decisions. They have tools to help you stay on track and focused on what is important. We have a Fiduciary responsibility to our clients, to act in their best interest. An I-buyer like Open Door, Zillow, etc., etc., ARE the buyer, their goal and driving force is to buy the home as cheap as possible, so they can resell it back on the open market. They have no duty to the owner of the property or the the Buyer of Open Door's home.... In a nutshell there are your differences.  Now, in the litigious world we live in- you can be sued for anything, mix in the most expensive item most people buy in their lifetime and that puts the general public at risk. As many lawyers, NAR, ADRE and AAR have all said. 


 Today I am listing the top 5 reasons why a buyer will sue a seller. 


   #1. Not disclosing important details about the property to potential buyers, in writing. What may seem a small detail to you- could be a very big thing to someone else. One of the only documents that is still valid after the closing is the Seller Disclosure Statement. so just because you closed on the home, does not mean the buyers can't come back and sue if they feel wronged.  


   #2. Not disclosing material facts on the seller disclosure paperwork, sellers are asked a myriad of questions regarding their home including items like any roof or water leaks, termites, or pest issues, plumbing or air conditioning issues, zoning ordinance violations, building code violations, and more. It is vital that a seller makes every effort to disclose past and present issues, even if they have been resolved and even if they happened before they owned the house. If it is a known defect, it needs to be disclosed. Failure to disclose a material fact can certainly lead to a lawsuit. And it can be simple for a buyer to learn a seller knew of a defect. It’s not uncommon for a neighbor to provide a statement outlining a previously known issue.  


#3. Concealing a defect Another way a seller can be sued? By concealing a defect through fraudulent misrepresentation. Or repairing an item in the home without disclosing it. An example of this would be a seller who freshly painted over a ceiling leak just in time for an inspection or who, on the extreme end of the spectrum, collaborated with a home inspector to create a fictitious report. 


#4. Making a disclosure mistake It should be mentioned that not understanding a question on the seller disclosure paperwork or making a mistake when filling out the documents does not negate a seller from their responsibility to disclose what they know. That small mistake could lead to multiple thousands of dollars in a lawsuit. 


#5. Not filling out paperwork correctly, disclosing other parties on title, having work done on the property and not paying the trades or making incorrect statements to the title company, or errors on the paperwork to the title company


As We see it that is a big value,  So if you want a great team behind you- contact us to buy or sell a home throughout the East Valley of Phoenix, including: Phoenix, Mesa, Gilbert, Chandler, Tempe, Scottsdale, Queen Creek, Apache Junction, San Tan Valley, Gold Canyon! 602-644-1416.






Saturday, January 30, 2021

Mid month Market Report

 


End of January  Pricing Update and Forecast

Each month about this time we look back at the previous month, analyze how pricing has behaved and report on how well our forecasting techniques performed. We also give a forecast for how pricing will move over the next month.

For the monthly period ending January 15, we are currently recording a sales $/SF of $214.92 averaged for all areas and types across the ARMLS database. This is up 3.0% from the $208.70 we now measure for December 15. Our forecast range mid-point was $212.50, with a 90% confidence range of $208.25 to $216.75. Prices rebounded sharply from the brief lull in early December and came in $2.42 higher than we forecast. However the actual result was well within the 90% confidence interval.

On January 15 the pending listings for all areas & types show an average list $/SF of $218.10, up 2.2% from the reading for December 15. Among those pending listings we have 98.8% normal, 0.5% in REOs and 0.7% in short sales and pre-foreclosures. There has been little change in these percentages compared with last month, and the number of distressed sales remains extremely low by historic standards.

Our mid-point forecast for the average monthly sales $/SF on February 15 is $220.18, which is 2.4% above the January 15 reading. We have a 90% confidence that it will fall within ± 2% of this mid point, i.e. in the range $215.78 to $224.58.

Average sale $/SF has risen 15.8% in the last 6 months, equivalent to an annual appreciation rate of over 31%. If our forecast proves accurate the next month will take us to an 18.6% increase over 7 months.

Appreciation rates of over 20% are inevitable by the time we get to April 2021.

From Cromford Report-The data used to create the Cromford® Report is obtained from public records and obtained under license from the Arizona Regional Multiple Listing Service, Inc (ARMLS). Cromford Associates LLC and ARMLS expressly disclaim and make no representations or warranties of any kind, whether express, implied or statutory, as to the accuracy of the data used.