How to Get the House You Want in This Red Hot Real Estate Market
Photo by Blake Wheeler on Unsplash
When it feels like sellers have the upper hand in the real estate market, buyers need an edge to make their offers stand out, especially in a bidding war.
Home prices and interest rates have risen, and the housing market isn’t as favorable to buyers as it was a few years ago. Yet in a recent Gallup survey, 65% of Americans surveyed said it is a good time to buy a home. High demand and limited stock make for a seller’s market, and often means homes will have multiple offers. Here, real estate agents offer strategies to help buyers snap up their dream home:
Show You Can Close the Deal
Get preapproved for a mortgage. Crystal Swearingen, a Realtor with The Crystal Clear Group in Lawrence, Kansas, says that being preapproved for a mortgage loan is an important first step. She also recommends that clients use a local lender who sellers might know or trust more than an online lender.
Cash Is (Sometimes) King
Paying cash for a home can help, but Forrest Gregg, senior vice president for Allie Beth Allman & Associates in Dallas, Texas, says that if the price isn’t fair, sellers will turn away a cash offer for a loan offer that has a better price. Even if two offers are comparable in price and one is cash while the other is a loan, it’s not a sure thing which one a seller might select.
Gregg recalls a recent situation where a client offered a sum above the home’s listing price and would have paid cash for it. However, their offer was declined in favor of another buyer who was willing to accommodate the seller and let them lease back their property until they were ready to move.
“Cash is great, but there’s always that one mitigating factor that can throw a wrench into the system,” Gregg says.
So keep in mind the total package when it comes to making an offer a seller won’t refuse. Cash is an asset, but it’s not always the most valuable one.
Make Your First Offer Your Best One
“Consider the idea that the first offer needs to be the best. You may not have a chance to negotiate.”
When you make an offer on a house, it includes a purchase agreement that spells out the price being offered, how you are financing the purchase, when you want to deal to close, if there are any contingencies that the seller would need to address, and other key points to the transaction. When the market tips in the buyer’s favor, there may be more opportunities to negotiate if there no other potential buyers. But, when it’s a seller’s market, you might be competing with multiple offers on a newly-listed property, so the first impression needs to be good. Lowballing will likely get you nowhere.
“Consider the idea that the first offer needs to be the best. You may not have a chance to negotiate,” Gregg says.
Put Skin in the Game
In your offer, one area that can stand out is earnest money, which is a deposit that is made to show a seller you’re a serious buyer. The earnest money is part of the down payment, and on average it can be 1% to 2% of a home’s price.
The funds are held in an escrow account until the sale is in its final stages. If a deal falls through, the seller may get to keep the money depending on the terms of the purchase agreement. So, by putting forth a generous amount, it shows you’re serious about closing the deal.
Think of the Seller
Swearingen says that a buyer’s agent can help make the initial offer stronger by asking the listing agent “What does the seller need?” For example, would a longer closing time help them out? Or are there repairs that they aren’t able to make? If so, then it might be worth handling them yourself.
All real estate is local, and each market has its own fees. In Texas, Gregg says it’s typically customary for sellers to pay for title insurance for a property. In Lawrence, Swearingen says sellers typically pay for termite inspections. In these and other cases, a buyer may offer to pay fees for services to sweeten their deal.
Sometimes buyers submit personal letters with their offer as a way to make a connection with the sellers. Gregg says he has even seen one buyer create a video.
“Anytime you can get sellers engaged in your clients can help,” Gregg says.
Swearingen, however, cautions that personalized appeals could run afoul of fair housing laws since sellers can open themselves to complaints if they base their sale (or lack of sale) on protected classes. She says while she’s had clients use them in the past, she currently advises against them.
Don’t Rush Into A Contract
While timing is important in a sellers marker, Swearingen says that buyers remorse might come into play if emotions take over. This can happen, say, if a bidding war occurs, but the buyer with the winning offer only later becomes aware of standard fees like taxes or insurance they had not taken into account.
“I’ve seen a lot of properties under contract and then back on the market through no fault of the seller,” Swearingen says. She says first-time buyers need to educate themselves on what to expect in terms of what is involved in owning a home and how much home they can afford.
Continue your research:
PITI and Beyond: Your Mortgage Payment Breakdown
What Is Mortgage Insurance? (And How to Avoid It)
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