Early 2020, many feared the Real Estate market would crash much like it did in 2008, but as a surprise to us all, it had the opposite effect. Real Estate has become so highly competitive. Between the lack of inventory and low mortgage rates, the market has been flooded with more Buyers. Chances are, if you are in the market to buy you’ve already experienced this firsthand. That million dollar question you ask… how do you get your offer accepted in this market?
The easy answer:
Get creative, keep it simple and stay focused.
The more comprehensive answer:
For starters, align yourself with an experienced Real Estate Broker who understands the market and valuation of comparables. A Broker who is seasoned and has ebbed and flowed with the industry over the years so that they can educate, inform and guide you through the process.
Along with their expertise, start utilizing the following strategies to make your offer stand out, more appealing and competitive to the seller:
Properties aren’t lasting on the market for weeks, typically they are listed by the weekend and pending the next week. Loan applications can be daunting but do your homework upfront. Seriously, nothing is worse than finding the home of your dreams and losing out because you aren’t pre-approved yet. Have your financing in order, documents ready to go and be prepared to act quickly. If you don’t know where to start, ask your Broker for some lender referrals. A good lender is vital in this process.
Use Escalation Clause – This is a tricky one as more and more Buyers incorporate this into their offers. The idea is to offer the Seller ‘X’ amount of dollars above the highest offer up to a certain price. It does show the Seller how serious you are and that you are willing to compete even against the highest offer.
Consider waiving or reducing Contingencies
Before you get caught up in the adrenaline of buying and thinking you’ll do anything to get the property, know the risks of reducing or waiving your contingencies and what this means. The most common contingencies that Buyers try to be competitive with are the home inspection, loan and the appraisal. We recommend you reduce your home inspection due diligence period as it is fairly easy to have an inspector come out within 24-48 hours to give you a report on the condition of the home.
Where it can be problematic is if it is an older home or in poor condition that requires a specialist to come out and evaluate as that can take more time. If you are obtaining a loan, you need to be sure that you are fully qualified and that you aren’t going to have any problems getting the loan through with your lender. If you did the leg work up front, you can entertain reducing the contingency period if not removing it entirely to make your offer more attractive. In regards to your appraisal, depending on your cash in hand, amount you are putting down, and the above asking amount you are offering, it is possible to waive the appraisal contingency. This means you are willing to bridge the gap between the purchase price and appraised value if it doesn’t come in.
There are ways to safeguard yourself in this instance so that you aren’t feeling like it is an open checkbook by putting a cap on it. It is also very possible that your Broker as well as the Listing Broker provide comps as well as a list of repairs and improvements to the appraiser to help bring the value up to your purchase price. Tried and True Results!
Request an Appraisal Waiver from your Lender
If you are putting down 20% or more on your purchase there are times that you can get an appraisal waiver from your lender from the start so that you can go into a purchase with confidence that the lender will lend on the purchase price.
Shore up on Closing Date
Lenders are well versed in how competitive the market is and their goal is to help you move the process along. Talk to your lender and see how quickly they can close escrow. Seller’s like knowing that they are going to get their money in say 21 days versus 30 or 45 that is more traditional.
Have your Broker build rapport with Selling Agent
Real Estate is built on relationships and over the years Brokers & Agents have recognized that working with the right Selling Broker is as important as the right Buyer. Knowing that you are working with a seasoned Broker who will create a smooth & seamless transaction, that knows how to properly guide their Buyer, and that will make for a successful closing is extremely important, especially in this market.
Give the Seller a Love Letter
Over the years this was a great way to show the Seller who you are as a Buyer and how much you will love their home as your own. In recent years with the conversations of diversity, equality and inclusion this has become more of a hot topic and should be approached accordingly. Sellers do have the right to opt in for Buyer letters if they choose to otherwise, it is understood that you can not submit one.
Create your personal letter template upfront so that you can tailor it quickly to the specific property and circumstance, and add in some photos so that they can connect with you. When submitting an offer, have your Broker ask the Listing Agent upfront if the Seller is accepting personal letters or not. That way you don’t offend them if they aren’t, but can use it to your advantage if they are.
Although the current home buying process can feel overwhelming, exhausting and a bit defeating, know that there are useful ways to help you get your offer accepted and in the end when you unlock the door to your new home you’ll know it will all have been worth it. With all of these strategies, we highly recommend that you proceed here with caution and only after consulting with an experienced Broker.
Happy House Hunting.