Today’s real estate market is extremely competitive, with the vast majority of homes selling within 60 days.
That’s great news if you are a seller, but what does it mean if you are a buyer? How can you boost your chances of getting a home you love at a decent price, especially when the seller is getting multiple offers?
Jennifer Augustine, a Realtor with RE/MAX Patriots, 600A Eden Road, offers this advice:
How do you balance the need to make a quick offer with the need to make a thoughtful decision?
Laying the groundwork is key to both making a thoughtful decision and writing an offer quickly. Prior to finding the “one,” I have already helped the buyer secure a mortgage pre-approval and cost estimate from a local reputable lender. From there, I always encourage buyers, especially first-time buyers, to tour a number of homes before making a decision.
In every home I tour with a buyer, we talk about the condition of the home and any obvious issues. We discuss factors such as proximity to school and work. We discuss logistics of how the family will fit within the home, kitchen size, bathrooms, etc. We also continue to have discussions about the overall costs of each home we see, because depending on age and condition, every home will have different costs associated with its maintenance over time.
During this stage, homes the buyer has toured will sell, and sell quickly, so the buyer gets to see firsthand what is happening within the market.
How do you make a good offer?
Again, it’s about preparation and understanding that the market is very competitive, given the low inventory and high demand. It’s important for buyers to recognize the strengths and weaknesses in their ability to make the offer that wins. It’s also important for them to make the strongest offer they can from the get-go.
Price is obviously going to be the driving factor for most sellers, but there are a number of other terms of the contract that have value to a seller.
One of the biggest challenges average buyers face in a competitive market are cash buyers who are willing to buy without contingency and make settlement very quickly. Also, buyers who have large down payments using conventional loan products are more desirable to sellers than those bringing smaller down payments.
This is not said to be discouraging. Even with the fierce competition, I have helped numerous buyers using FHA or USDA loans with little to no down payment win the bid in competing-offer situations. Bottom line: Buyers must be willing to pay fair market value for the home they want, which in competing-offer situations is nearly always full price or above full price.
Should you have a pre-approval in hand?
Yes! I cannot think of one circumstance in which a seller would accept an offer without a preapproval. Same goes for cash buyers. For an offer to be considered, it must come with a preapproval or proof of funds.
If a seller is getting multiple full-price offers, what can you do to make yours more appealing?
The simple answer: The most desirable offer has the highest purchase price and waives all contingencies.
Most buyers require a loan, so waiving the mortgage contingency is not an option. While I will let buyers know in multiple-bidding situations that another buyer may waive their right to inspections, I personally do not recommend it. I’ll support that option if I’m sure the buyer understands the risks. Same with waiving the appraisal contingency. The appraisal not only protects the lender’s collateral, it protects the buyer’s investment as well. Just because others may be willing to pay more for a home than an appraiser thinks it’s worth doesn’t mean you should.
What else can you do to encourage a seller to choose your offer over someone else’s?
Paying your own closing costs is very helpful, even if it means asking a family member for some gift funds. Meeting the seller’s preferred settlement date is important. Keeping the inspection period short helps. For sellers, inspections are a source of stress, so getting through that hurdle quickly is very desirable. Be willing to offer a large earnest money deposit.
Also, I would never discourage a buyer from writing a personal letter to the seller that I’ll attach to our offer.
Some final thoughts:
What it comes down to is understanding the risks, understanding the process and putting your best foot forward once you’ve made the decision to have your Realtor write an offer. You can only do what you can do, and it’s important not to get in over your head!
Two years before meeting and marrying me, my husband twice lost in multiple-offer situations. In both of those circumstances, the homes only had three bedrooms and wouldn’t have accommodated our family. He eventually had an offer accepted on the four-bedroom home that we now share. It needed some work, and we still have renovations to make, but it is big enough for us and our four children, and we love the location.
So looking back, everything happens for a reason.
For help in buying your next home, contact Jennifer Augustine at 717-517-9222 or Jennyaug@hotmail.com.