If you are a buyer in today’s seller’s market, you know just how tough it is out there. There are simply more buyers than there are homes for sale, which can make the process of finding and buying a home incredibly difficult. Some houses are going under contract within hours of being listed for sale, while others are attracting multiple offers. It’s a competitive market for buyers, to say the least.
But don’t give up just yet!
I’m going to share with you some of the best ways to make your offer more appealing to a seller. The goal is to tweak all of the details enough so you are making an offer they can’t refuse.
There are many ways to make your offer more appealing to a seller as they are reviewing multiple offers. That being said, these 7 tips are my favorite because they are practical, effective, and don’t require buyers to give up too much.
7 Tips For Buying a House in a Seller’s Market
1 – Get Pre-Approved Like You Mean It
A pre-approval is a letter from your lender that confirms that you have been approved for a certain amount of financing. The problem with most pre-approvals is they are just that, a letter. Many lenders won’t actually submit a file to underwriting until there is a purchase contract and the house is in escrow.
But, if you can find a lender that will actually underwrite and process your loan with the property as “TBD” (to be determined), you will be able to stand out against other buyers. Submitting a pre-approval that includes a list of conditions from an underwriter, especially if they have been checked off, is about as close as you can get to guaranteed financing.
This is what I call a Full Pre-Approval, and it will help put your offer in the same league as all those pesky cash offers you are competing with.
2 – Don’t Ask For Certain Repairs
Home sellers are concerned about what is going to show up on the inspection. Why? It’s a big question mark for them in terms of cost. Unfortunately, they just don’t know what kind of repairs buyers are going to ask for until they have already chosen an offer and gone into escrow.
This is an opportunity for you to make your offer more attractive. When you tour the home, take note of items you see that may need to be fixed or repaired. Are you willing to NOT ask the seller for any of these?
In your offer, you can point these out to the seller as items the seller need not worry about because you will fix them yourself. Not only will this help the seller feel good about your offer, but it can also create anxiety about competing offers (that did not dissuade any of this concern for the seller), which can also help you 🙂
3 – Reducing or Waiving Contingencies
Offers will typically include a set of contingencies. The most notable are the inspection and loan contingencies. This means that the buyer has a certain amount of time to inspect the home and get financing before they are obligated to purchase the home.
If the loan is denied, or the inspection turns up something that causes the buyer to change their mind, the buyer can walk away from the deal without forfeiting the earnest money deposit (EMD). The amount of time that these contingencies are in place, however, is a matter of negotiation.
Depending on your level of confidence either about the home, or the financing, you may want to consider reducing the amount of time for these contingencies. If you really want to entice a seller, there are situations where you might even consider waiving a contingency altogether.
If your loan has been completely approved and underwritten as “TBD,” you could waive your loan contingency. Financing is one of the big reasons that transactions fall apart, so by removing this contingency you are making your offer much more attractive.
If you choose to waive your loan contingency, however, I would recommend NOT also waiving the inspection contingency. You don’t want to give up all of your protections, and a reasonable seller wouldn’t expect you too. If, however, the seller does insist, just hold your ground. The other offers will most likely not give in on all of these contingencies either.
4 – Increase Your Deposit
Money talks. By increasing your deposit you are signaling to the seller that you are serious about purchasing this home. A larger deposit coupled with a full “TBD” loan approval and reduced contingency periods makes for a pretty enticing offer.
But so far we have only addressed building a seller’s confidence in your offer by altering some terms and conditions. Now, let’s talk about the how much we should offer for the home…
5 – Don’t Make a Lowball Offer
It’s a seller’s market, so you just have to accept that most homes are going to at least sell for full market price. Some will even sell above market. Making a lowball offer to a seller will likely get your offer sent straight to the bottom of the pile, all but insuring you your offer is denied.
Keep in mind, however, that full market value is not the same thing as list price. You should not be deciding whether or not your offer is strong based on the list price, it’s the full market value we want to look at when making our assessment. Sellers will use different strategies for listing a home depending on the local market. So you can’t always assume that the list price is the benchmark when making an offer.
The fact of the matter is that many sellers do overprice their home, especially in a seller’s market. These homes tend to sit on the market for a long time without attracting much interest from buyers. If you’ve done your homework, you can use this as an opportunity to buy a home from a motivated seller, without a lot of competition.
Make an offer that is at market value (obviously below their list price). You will most likely be the only offer at this time, and since the price is reasonable, he seller (frustrated from not receiving any offers yet) will be likely to entertain it. This strategy won’t work with every seller, but when it does it is a great way for a buyer to gain leverage in a seller’s market.
6 – Make a Clean Offer
Every region has certain norms when it comes to real estate transactions. Here in Orange County, for example, it is normal for a seller to pay for a buyer’s Home Warranty. The seller also gets to choose the title and escrow companies for the transaction, typically.
To be safe, you probably want to stick to the traditional terms. Don’t ask the seller to pay for your closing costs or insist on your own title or escrow company. An offer with traditional terms would be considered a clean offer.
You may even want to consider offering to buy your own home warranty, rather than asking the seller to pay for it. This will save the seller about $500, which makes your offer that much more appealing than the next one.
7 – Delay Possession
Price is not always the most important factor for a seller. Sometimes sellers are also buyers in another transaction, and need to buy and sell at the same time. Depending on how that transaction is panning out they may need a longer escrow, or more time after escrow, to seamlessly get moved from one home to the next.
Offering to work with your seller’s desired timeline might be the critical difference between your offer and the others. Find out what the seller really wants, and see if you can accommodate them, it just might be what makes all the difference.