How do you stand out as the buyer who gets your offer to buy a home accepted?
Housing inventory is low in many areas, meaning that it is a seller market. This means you, as a home buyer, have to be on top of your game. The seller needs to know you are serious. Very serious.
In the large-scale seller’s market that has stood strong for the last few years, homebuyers are at a disadvantage as they try to compete with other house hunters for the limited number of houses on the market. Formulating an offer isn’t just about the asking price, but also what other potential buyers could offer at the same time.
On the receiving end of the offer, sellers have to be able to weigh the buyer’s offer carefully, negotiate the terms and be as transparent as possible to avoid the deal falling through later in the process. As all real estate markets work through a cycle, sellers should also be ready for changes that give the buyer an advantage over sellers, whether it’s a temporary or prolonged buyer’s market.
So how do you get your offer accepted?
Making an offer on a house isn’t just about telling the seller how much you’re willing to pay. It’s also important to provide proof that you’re able to pay the amount, establish the expected closing date and state how additional costs will be covered and what you expect of the seller leading up to closing. By submitting an offer, you also need to be prepared to provide earnest money, which shows the seller you’re serious about buying the house and can range from $500 to 10 percent of the agreed-upon price.
Especially if you’re house hunting in a market where there are few available properties compared to the number of active buyers, submitting an offer as soon as you’re sure you want to buy it is a must. Even if you move quickly, there’s a chance you’ll find yourself competing with other offers.
Timing is everything…
“The first call I make when someone’s interested in a home is to reach the other agent – the listing agent – and find out if there’s any other offers that they have in hand, and if so how many,” says Jeff Plotkin, a Texas-licensed Realtor, attorney and certified public accountant and vice president of Habitat Hunters Inc. in Austin, Texas.
Even when competing offers are less likely, you must move quickly to avoid missing out on the house you want.
The seller has his/her ideas about the value of the property/home. You and your agent need to determine if the seller is being realistic in pricing their home.
While the listing price does provide some insight into the seller’s expectations, the value of the property and the work that needs to be done play a larger role.
When you’re ready to make an offer, your real estate agent will likely sit you down and show you the sale history of properties nearby to help determine the home’s approximate value as it compares to the rest of the market. “I like to look at the last six months of houses that have sold in the same neighborhood, or very close proximity, of a similar size,” Plotkin says.
In addition to recent sales and current buyer activity, you need to factor in your personal needs. Consider the details this house checks off for you, and consider the amount of work you’d have to do. Take into account details such as:
Proximity to work, schools, stores, etc.
Age of major systems and appliances, including the HVAC, roof, plumbing and electric
Renovations that need to be done
Sometimes, you have to go with your gut feeling…
While your agent will help you consider all the factors that lead to the offer price, the price itself is something you have to determine on your own. Pamela D’Arc, a licensed associate real estate broker for Stribling and Associates in New York City, says she’s learned to advise the buyer appropriately but “never give a number” to avoid making a decision the client isn’t happy with in the end.
Do you need the contingencies? They can be very useful for you, but they might not be considered useful to the seller.
Once you’ve moved past the price portion of the offer, consider if other needs and conditions will be included. If you already own a home and need to sell it in order to have the money to pay for this new one, an offer contingent on the sale of your house is necessary.
This offer contingency can be a sore point for many sellers, especially in a seller’s market where other buyers may not have the same constraints.
Barbara Pepoon, a broker with Coldwell Banker Residential Brokerage in Northbrook, Illinois, recommends putting your home on the market before you start the search for your next house. “Once you have the house under contract, you can make offers with home-close contingency,” she says. The contingency will show you’ve already found a buyer and simply need to have the closing on your purchase take place after the sale is completed, which can even take place on the same day.
Low inventory in many housing markets in the U.S. makes the competition among buyers a constant part of the conversation for many homebuyers, particularly for those who are house hunting for the first time. Many buyers are afraid of getting caught up in a bidding war and paying more than they can afford or losing out on the house of their dreams.
So how do you compete when you are in a bidding war?
Write a personal letter. It’s not recommended for every situation, but D’Arc says a personal letter to the seller can make an offer stand out, especially when the seller appears to have some sentimental attachment to the property. Even if your offer price isn’t the strongest, tugging on the seller’s heartstrings can win you the deal, she says.
Include quirky numbers. Rather than rounding to the nearest hundred or thousand, let some of the numbers stay specific in your offer. Offering $345,255 instead of $345,000 registers as a higher number when it’s just a difference of a couple hundred dollars. If you note you’ll cover $1,905 of the seller’s legal fees instead of $1,850, the slight difference in dollar amounts can stick in the seller’s memory. “Quirky numbers can sometimes be the difference,” she says.
Be flexible. A good real estate agent will try to get as much information about the seller as possible from the listing agent so you can structure your offer around those needs. If the seller’s moving out of state, a quick closing date could be more enticing. With the closing date in particular, it serves you well to express that you’re willing to meet the seller’s needs.
Do not fret, do not get discouraged, if you are not successful the first few times…time will be on your side.
Keep in mind that even if you lose out to competing buyers once or even a few times, eventually your bid will be the right one. Don’t get discouraged, and don’t shy away from making an offer on a house because you think you’ll lose out to another buyer. “Most people will still take their best shot – it doesn’t cost a thing to make an offer,” Plotkin says.
(Source: US News & World Report)