Real tips for succeeding in a seller’s market from real real estate agents (try saying that 5 times fast!)
Have you heard? It’s a seller’s market.
What that means is right now we have fewer houses available to buy than there are active home buyers.
So in many areas we are seeing buyers in bidding wars over the few homes which are available.
While this is great news if you’re a homeowner who happens to be relocating out of state, it’s slightly less great news if you’re a homeowner looking to make a local move or a first time home buyer.
But, you can still succeed as a buyer in a seller’s market and come away with your dream home. Here’s how:
My best advice is to start your search early and start your search right.
Get super clear on what you need and what you want and where you’re willing to give a little
Get help from a real estate agent - as a buyer you don’t pay commission, regardless if you work with an agent or not, but having representation from a professional can definitely help smooth your way home and open up other opportunities you might not have access to otherwise
And if and when you find yourself in a multi-bid situation, here is our strategy for success
You can use all of these, some of these, or none of these. But just keep in mind, sellers are often receiving 15+ offers on a home, and ANYTHING you can do to place your offer ahead of another will help.
Price - The most obvious, but also (usually) the most important factor to consider.
Some tips below for deciding how much to offer:
Find Your "At Peace" Point - When considering what you're willing & able to offer for this home, try to come up with a number where you'd be happy if you got the home and okay with it if you don't. When you have a number in mind, imagine your offer being accepted at that price AND imagine it going to someone else at a higher price. While not an exact science, this can help bring you clarity. You don't want to feel regret and anxiety if your offer is accepted at a price higher than you're comfortable paying OR regret the home going to someone else for a price you realize you'd have been willing and able to pay.
Evaluate the Per Month Costs - Work closely with your lender to calculate the actual per-month changes in your potential mortgage payment should you increase the price of your offer. Sometimes it's less than you think! Conversely, no one should ever purchase a home at a price they cannot afford.
Escalation Clause - An Escalation Clause is a real estate contract that basically states:
"I am offering X price for this home BUT if the seller receives another offer that's higher than X price, I will increase my offer in increments of Y not to exceed Z maximum offer price."
Escalation Clauses are helpful in keeping your bid competitive without immediately offering your maximum price. In order to accept your offer at a higher price than the initial offer amount, the seller must produce proof of an offer at a higher price.
When choosing the increment amount for increasing over competing offers, it's best to choose a slightly unusual amount so that it doesn't match any other offers or clauses. For instance, it's better to say that you'll increase your offer in increments of $3,250 than $3,000.
Escalation Clauses are not always allowed since they can really complicate things, especially when there are a great number of offers on the table and many with escalation clauses of their own. The seller and their agent may simply require that all buyers submit their best and final offers
Deposit Amounts - A large earnest money deposit shows you are serious about the home. Any money made in deposits goes towards your down payment and closing costs.
Closing Date - Have your agent do some research about what the seller wants. Do they want to close as quickly as possible? Is it best for them to close after school ends in the summer. Whatever they indicate is their ideal timeframe, try to structure your offer to accommodate that AND ask your agent to mention when submitting the offer that you are flexible on closing, depending on the seller’s preference.
Inclusions and Exclusions - Again, have your agent do some research, beyond the online listing if possible, and check with the seller’s agent about what the seller prefers to include or exclude. In some scenarios (such as the sale of an estate) the seller may prefer to sell the property “as is” with no cleanout of personal items. If as a buyer you’re willing to accept responsibility for removing any unwanted household items after closing this can weigh greatly in your favor.
Mortgage Terms - First and foremost, cash is king. But for most buyers, buying a home with no mortgage is not an option. There are still several things you can do to make your offer more attractive.
Check with your lender about how quickly they can move to order your appraisal and issue your mortgage commitment and make this deadline as early as possible
Include a wider interest rate range
Increase your down payment
Choose a trusted, local lender, if possible one that both the listing agent and your agent have worked with in the past
If appraisal value is a concern, include in your contract that you can make up X amount of difference between the appraised value and the purchase price should the value come short of the purchase price
Seller Assists - If possible, reduce or remove seller assists. These bring the purchase price higher without netting the seller any additional money so if you don’t need them, don’t include them.
Waive or Limit Inspections - Having one's home inspected can be one of the most stressful parts of selling a home. Waiting the typical ten days to receive inspection results and any requests from the can be very nerve-wracking. Shortening this time frame by even a few days may make your offer more desirable to a seller. Another option is to specify that you will be inspecting for “informational purposes only,” with no repairs or credit to be requested.
Cap Inspection Requests - In a similar vein to shortening the inspection time frame, committing to waive a certain amount of any necessary repairs to the home is another strategy for giving your offer an edge over other offers. Agreeing to waive the first, say $1000, of any repairs recommended on your inspection report can communicate to the seller that you really want to own this home!
Personal Letter - Personal letters don’t typically sway a seller to accept an offer with less favorable terms, however, all else being equal, they can definitely weigh in your favor if the seller has received multiple similar offers. For the most impact, write something heartfelt and short, and include a photo of your family and/or pets.
I hope this list gave you some inspiration and motivation.
Wherever you are in your home journey right now, I’m happy to help, from setting up off-market searches to helping you win the bidding war.
Reach out and let’s talk!