The home sale market for homes under $400,000 is hot in many places in California. And knowing what to offer is tough. Especially with the multiple offer competition that is being encouraged by all sellers including bank owned properties, flips, and short sellers when they intentionally price their home low. A home priced at $325,000 in a multiple offer situation could easily sell for as much at $350,000.
The most significant information is the sale price of comparable listings that sold within the last 90 days. In multiple offer situations it is most likely the property will sell for more than the asking price. Attending public open houses in the neighborhoods where you would like to live is a good way to find out about value. The Internet is full of great information on values, but beware that those sites never actually sold a home. Your best resource is a knowledgeable about the current market and prices and trends is a great help.
It takes a lot of time and it is stressful to make offers over and over with no results. I know of clients that have looked for 6 months or more and have made 10 or more offers that get discouraged and give up. You must be ready to be realistic about what you can afford and if what you want is truly even available in your desired neighborhoods. In this upward moving price market it is self defeating to look for properties up to $300,000 for example when what you can really afford is $250,000. In fact, if you can only afford $250,000, you probably should not even look at properties that are asking more than $235,000.
Sellers are looking for reassurance that a transaction will close. They are looking for pre approved (by their lender) buyers with a clean offer and as much cash as possible at or above the asking price. With inventories low and first time buyers and investors plentiful, the low end housing market is truly a seller’s market.
All cash buyers get the first look from sellers, especially bank owned properties that have been foreclosed on. Next, they look at the highest down payments and what the nature of the financing is. If it is FHA your offer may not even be considered if the property is in need of repairs that the seller is not willing to do. In the case of flips where the property has not been owned by the investor for 90 days they will not even look at FHA offers. A seller may accept an offer that is much lower than yours if the offer that is lower is all cash. And if the seller has any fear that the home will not appraise for the price it sells for then the seller might ask you to remove any appraisal contingencies from your contract. This can endanger your earnest money deposit. All cash buyers usually do not ask for or care about an appraisal and sellers know this works in their favor.