You may have heard the real estate horror stories of the hoops a buyer jumps through in a seller’s market. There are urban legends of high bidding wars or unexpected discoveries from an eager buyer who skipped the home inspection contingency.
Are you nervous yet? Don’t be! There are reliable methods for buying in a seller’s market that will help your offer rise to the top. I promise that it’s not all doom and gloom.
The number one way to help yourself, regardless of the current real estate situation, is to work with an experienced agent. An expert representative will know the ins and outs of your area’s market. Julia Monaghan Real Estate has a wide breadth of knowledge and expertise to make sure you can find the home of your dreams.
You Can Make the Winning Offer In a Seller’s Market
Believe it or not, even with limited inventory on the market, there are trusted methods to make your offer visible and attractive. But, buying in a hot market requires you to act fast, so preparation is crucial.
Work with your agent to craft a list of non-negotiables and a list of wishes that are flexible. Having a clear picture of what you want will help you move quickly when viewing a home.
Put Your Best Offer Forward
If you’re trying to buy a house in a seller’s market, you could be up against many other buyers. When competition is stiff, it is not time to be looking for a deal. Submitting an offer below the asking price makes it unlikely a seller will accept it. A seller’s market has more buyers than the inventory can support, creating significant competition for desirable properties.
For your highest chance at success, make your offer at or above the asking price. You also may want to talk with your realtor about including an escalation clause in your offer.
This clause states an amount that you are willing to pay over the highest bid the seller receives. It shows the buyer that you are serious about purchasing and have a solid commitment to their property.
Your agent will ensure that you have protections in place when submitting an offer with an escalation clause.
Make It Personal
Submitting a short, personal letter or video of interest with your offer can go a long way to grabbing a seller’s attention. You want to show the seller who you are and why their house is the one for you. Be clear and authentic as you tell them what you love about their home.
Not sure what to write? Here are some things you can include in your letter to make it more relatable:
- Mention features of the home that attract you.
- Explain plans or enthusiasm for enjoying the existing garden space.
- Point out historical architecture you commit to preserving.
- Detail dreams for the future, such as growing your family there.
Another great way to build rapport through this personal letter or video is by noting details in the property and how it relates to you. For example, the flower gardens might remind you of your childhood, or a window seat may look like it’s from your favorite book.
You want to make an emotional connection, which is often best arrived upon through honesty and vulnerability. Let them know what the house means to you and why you think it’s the perfect place for the next stage of your life.
It’s important to note that there are concerns legal aspects to keep in mind about this practice and fair housing. Be sure to talk with your realtor to understand the benefits and risks and to make sure the seller is OK with receiving a letter like this.
Be Completely Prepared in a Seller’s Market
Many buyers try to start their home search with a mortgage lender pre-qualification. But to be competitive in a seller’s market, you must be preapproved. What is the difference between the two?
A pre-qualification means that the mortgage lender has made a preliminary assessment of how much you might qualify to borrow. A pre-approval, however, involves a thorough application process that involves submitting your financial records and receiving approval for a mortgage.
Having this document in hand tells the seller that you are ready to buy. It also means that they can count on a reasonably quick closing process since the funding is already approved.
In a competitive market, buyers need to put themselves in the seller’s shoes. Offering favorable terms that alleviate their stress can help your offer stand out from others. There are options that will reduce the seller’s risk while still protecting your interest in the deal.
At Julia Monaghan Real Estate, we encourage buyers to consider terms such as:
- Rent-Back Periods
- Placing a Cap on Inspection Repairs
- Avoiding a Sale Contingency
- Waiving the Financing Contingency – Be sure to discuss this carefully with your agent because it can put your earnest money at risk.
Earnest money, also known as a good faith deposit, is money the buyer submits with an offer. It sits in escrow until the deal is complete and offers the seller financial protection if the buyer breaks the contract.
Generally, the earnest money is 1-3% of the house’s contracted sale price. If you increase that amount to 4% or more, you can definitely get the buyer’s attention. As with anything during the home buying process, listen to your realtor’s advice. Your agent will make sure that your earnest money is not at risk.
How To Buy a House in a Hot Market
If your desired property is in high demand, multiple offers are likely. But there are some things you can do to stand out from the crowd:
- Look for houses that are below your maximum budget. This tactic will leave room for you to bid higher if necessary.
- Don’t add many contingencies to your offer. Asking a seller to accept your offer contingent on you selling your current home just creates a barrier. They are likely to accept an offer with no such contingencies instead. However, if you must place a contingency offer, work with a strategic agent who has had success in getting them accepted.
- Be flexible with what you want as you house hunt. You may need to look in a different neighborhood or consider a home that needs some upgrades.
- Keep your schedule as open as possible. In a competitive market, you will have to move quickly. Homes can sell within hours of listing. So the more available you are, the better chance you have of getting the house you want.
Expert Help in a Seller’s Market
Navigating the real estate landscape in any market encompasses legal, financial, and emotional components. You need someone on your team who knows the market and can guide you expertly from start to finish.
At Julia Monaghan Real Estate, we help home buyers like you navigate a seller’s market and come out victorious. Contact Julia today to begin this exciting journey toward finding and purchasing your dream home.