6 Tips For Competing Against Other Homebuyers in a Sellers Market
Looking for a new home can be a rough process. Not only can you end up spending months looking at listings online and going to pen houses before actually finding a house that suits your needs, your bid may not even be accepted by the seller. This can happen if the house you want is slightly outside your price range, leading you to submit a bid that’s lower than the asking price. Or maybe you’ve got some competition and another buyer has made a bigger offer than yours. This can happen in a seller’s market, wherein the buyers outnumber the sellers, which can result in prices being driven up due to demand. Once you’ve found a home that you absolutely want to buy, then it’s time to step up your game to beat out the competition and have your bid accepted. Here are six tips for helping you to achieve this:
1. Get pre-approved for a mortgage
One of the biggest unknowns for a seller is whether a buyer has the money to pay what they’ve bid. If you’ve gotten pre-approved for a mortgage, then you should have all of your finances straightened out. By letting the seller know you already have a mortgage loan in place because you’ve been pre-approved, they will know you are a sure thing. This often beats out a buyer who may have put in a larger bid but doesn’t have his or her financing secured yet. However, to cover yourself, have the house appraised as early as you can.
2. Provide a bigger earnest money deposit
The earnest money deposit is the customary deposit that you provide along with your bid. If your bid is accepted, then that money will go toward your down payment once you close. If your bid is not accepted, the money is returned to you. One way that you can impress the seller is by making a larger- than-customary earnest money deposit to show them you are serious about purchasing the house.
3. Find out what the seller wants
Finding out why the owner is selling their home can help you to give them what they want. For example, maybe they are trying to sell the house in a hurry because of financial needs, or they are moving out of state for new employment opportunities. Maybe they are in the process of buying a new home and need to sell their old home quickly in order to pay for the deposit. You can help speed up the closing process by adding terms to the bid that are favorable to them, such as the quick removal of contingencies. Maybe the owner still needs to find a new place to live, in which case you could offer a rent- back term that would allow them to stay in their home after the sale for a specific amount of time, thereby allowing them some time to find a new place and giving them the security of having money in the bank as they do so.
4. Do a home inspection before making a bid
Many buyers will make a bid that’s contingent on a home inspection. This means they can retract their bid if the home inspection’s results aren’t unacceptable. If you have a home inspection done first, you can submit a non-contingent offer (if the results are acceptable for you). This is often much more attractive to sellers since you can’t pull out if they accept your bid.
5. Make a bid that’s higher than the asking price
While it’s not recommended that you pay for anything that’s over your budget, you may be able to find a house that is priced under your budget that you can overpay for without going over your budget. You may end up paying over the current market value of the house, but you’ll have a better chance at beating out the competition. People often don’t understand that t he market value is only what buyers are willing to pay for it!
6. Add an escalation clause to your offer
An escalation clause allows you to make the biggest bid no matter what because it authorizes your real estate agent to offer a certain amount of money such as, for example, $1,000 above the highest bid that the seller receives. This tactic is only suggested if you are willing to get into a bidding war for the house. Just keep in mind that you can end up overpaying for the property by quite a bit, which means that your budget needs to be flexible.
If you’re in a seller’s market, then there’s a chance that you’ll have some competition for the property that you want to buy.
Use these six tips in order to give yourself a leg up on the competition.