What is a Seller’s Market?
A Seller’s Market is when there are more homebuyers in a particular market looking to purchase a home than actual houses listed for sale. You can expect home prices to go up, with more competing offers on available homes for sale. During this time home sellers will have the upper hand when it comes time to negotiate. However, you shouldn’t worry if the U.S. housing market is indicating a seller’s market and the competition is fierce, you can still buy a house. Equip your homebuying arsenal with nine tactics you can use to be competitive and make your offer shine above the rest.
Be Ready to Act Instantly in a Seller’s Market
1) Get Pre-Approved for a Home Loan
One of the smartest things you can do to ensure you have the best chance of buying the home you want is applying for pre-approval on a mortgage. Many times, homebuyers make an offer on a home and then apply for a mortgage afterward. This tells home sellers you may not be as motivated to buy as others. An underwritten pre-approval for a mortgage usually takes about 24 hours, and this type of pre-approval is much stronger than the 90-minute pre-approvals.
Furthermore, you’ll receive a letter that you can bring to the home sellers in these neighborhoods, which shows them that you are already working with a lender. The letter indicates that you’re able to afford the home and won’t be wasting their time.
2) Get a Great Real Estate Agent
The home buying process can be stressful and sometimes overwhelming. Having a real estate agent by your side through the buying process can help make everything go more smoothly and aid you in acting quickly. Especially if you are in a large market like Atlanta or New York Your buying agent will have a better idea of the local market and can provide you with insights into each neighborhood, such as the Walkability, school districts, as well as any problems that may be associated with the home and much more. They can also advise you on how to make a competitive offer on a home you may be interested in. Agents know the local markets and individual neighborhoods and will use that knowledge to negotiate effectively on your behalf.
How to Make Your Best Offer
Once you have gone through the pre-approval process, toured the home with your agent, and are ready to put an offer on your potential new home, you will want to make the best offer you can. The following are some things you can do to make your offer stand out among the rest.
3) Write an Offer Letter Catered to Each Home Seller
As real estate offer letters become more and more common among homebuyers, you have to find a way to make yours stand out. This is especially important in a seller’s market and in competitive neighborhoods. You want to grab the home seller’s attention by using well-crafted sentences and fonts that stand out. Don’t just tell the sellers you want their house, tell them why you want it, they will be appreciative to hear what you love about their home. Additionally, if you share something in common with the sellers, mention it in your offer letter. This is a great way to make yourself more relatable, and will also show that you wrote it specifically for their listing.
4) Make an Offer in Cash if You Can
For sellers, an all-cash offer is very appealing and can lead to a higher likelihood of making a sale. If you don’t have to use a lender, there’s no financing contingency, which shows the sellers that you will most likely not pull out of the deal due to financial issues. If you pay in cash the sale can happen more quickly for the home seller and, overall, lead to a more smooth home sale.
5) Put More Earnest Money Down
Earnest money is an amount of money you put down to show how serious you are in purchasing a home, it is also known as good faith money. Earnest money protects the home seller if the buyer backs out. Unless they back out due to something coming up in a home inspection or appraisal, then they will get to keep their earnest money. Earnest money can be a necessity if you’re shopping in a seller’s market or competitive neighboorhood because sellers tend to favor buyers who put down a decently sized installment of good faith money. If you put down more earnest money than your competitors, it tells the sellers you are serious about the deal and gives you a leg up on the competition.
6) Add an Escalation Clause
An escalation clause is inserted into a purchase offer for a home and is intended to make sure you get the chance to be the highest bidder. This clause states that if the seller receives another offer that is higher than your initial bid, you are willing to increase your offer to a higher set price. Want to give yourself the best chance at calling home in a hot neighborhood your own, then add an escalation clause to your offer.
7) Don’t Have Any Extra Contingencies
In a seller’s market, you may want to submit an offer without certain contingencies as a way to make your offer win against other competing offers. It is advised to keep the home inspection contingency, as your potential new home should be assessed by a qualified home inspector to see if it has any hidden damage or major flaws. You may want to pass on other contingencies such as a mortgage contingency since you have already been pre-approved for a home loan.
8) Don’t Restrict the Sellers to a Timeline
Limiting the home seller to a timeline can bring them extra stress during an already very stressful time. Give the home seller the gift of time, allowing them the flexibility to move out whenever is best for them. Something as simple as time might give your competitive offer the edge it needs to win over the home sellers.
9) Be willing to make concessions during negotiations
During the negotiation process, you may have a better chance of closing the deal if you are willing to make compromises. There may be some things that you are not willing to budge on such as a home inspection, but maybe you don’t ask the home seller to redo the back deck or paint the house before you move in. This will allow for a smoother closing process and for you to move into your new home more quickly.
Buying a home can be difficult, especially if you are buying in a seller’s market. Use any or all of the recommended tips to stand out from the competition to help you purchase your next home.