Hi! Happy #MotivationMonday! Let's talk about a topic on every buyer's mind right now-How do I get my offer accepted in one of the most competitive real estate markets we have ever seen? It's the number one question for homebuyers in 2022. The pressure just continues to build, since housing levels are historically low. This type of competitive market is exhausting for many home buyers. Winning a bidding war takes patience. My agents are telling me crazy stories of how this market is affecting clients. I recently heard of one client who offered $40,000.00 over asking price and still lost to a competitive buyer. It can be disheartening. Here are 10 tips and strategies to help you beat the competition and win your dream house.
1) Offer an Escalation clause. An escalation clause is a provision added to a contract that the buyer will escalate their offer above the highest sales price submitted. This clause normally has a maximum escalation amount. When a bidding war takes place, this tactic keeps your offer at the top of the list. You should only use an escalation clause when you can afford to escalate your offer significantly above the asking price. The pros of an escalation clause are that they immediately put your bid at the top of the list. The cons are that they can manipulated by the listing agent and cause you to pay much more than your initial contract price. If a seller's agent receives an escalation clause, they can solicit the other buyers to keep pushing the price up. Once they have maxed out the price, you're stuck paying a specific dollar amount above the asking price. They are a great tactic and tool to use if done properly. They can also be a legal nightmare to navigate if not appropriately structured. You need a well trained agent who has strong broker support on your side.
2) Offer a Leaseback to the seller. A leaseback allows the seller to lease the property from the buyer after closing. Since some deals fall through before closing, it can be risky to move out of a primary residence before the transaction has been funded and completed. This strategy allows the seller to sell their home to you, and move out afterward, which eliminates their risk. In addition, leasebacks offer security to the seller that they do not need to move until the deal is finalized. And, you can offer to waive rent and a security deposit. This tip can make your offer stand out to the seller and give you an edge over the competition.
3) Offer a guaranteed amount above appraisal price. When buyers offer this option, they must be prepared to pay the difference between the appraisal price and the negotiated price. This also waives the appraisal contingency. This perk offers the seller extra assurance that they won't be in a situation to drop their home price. You need to be sure to have the cash on hand to bring to the closing table. Take time to understand the ramifications of this negotiation tactic. First, you are essentially paying much more than fair market value. Second, if you happen to do this right before the real estate market adjusts, you may be stuck with an overpriced home.
4) Offer more earnest money. Earnest money is offered to help the seller justify taking their house off the market. It's a way of proving that you "earnestly" want to purchase the property. If you offer more than the standard amount of earnest money requested, you are showing your intent to follow through. You can also offer to waive your refund of the earnest money deposit if the deal does not go to the closing table. This strategy shows serious intent to buy, pushing your offer above others that look less serious. It also demonstrates your ability to make the purchase. If the listing agent is presenting multiple offers and your earnest money is strong-perhaps the amount you guaranteed above appraisal price-you demonstrate that you have the funds and you have a vested interest in consummating the transaction.
5) Offer to pay seller moving expenses. If you are making an offer on a competitive home that is occupied, consider offering to help pay for the seller's moving expenses. This is a unique strategy, not commonly used, which can make it more effective and let's your offer stand out.
6) No personal letters. A previous tactic in older markets was to encourage buyers to write a personal letter to create an emotional bond with the seller. Unfortunately, this practice caused fair-housing lawsuits. As a result real estate agents should now avoid these letters. Most listing agents will not even present a personal letter to their clients in today's legal environment. By attaching a personal letter to your offer you create extra tension for the listing agent, which will not help you in any way.
7) Offer to pay seller closing costs. To help your offer stand out, consider paying the seller's closing costs as well as your own to alleviate that burden from the seller.
8) Waive inspections. Once a home goes under contract, the deal is not done. The next step is to perform a home inspection. This process is stressful for sellers because they have little to no control over the home inspector's qualifications. Ten different home inspections can yield ten different home inspection reports. Sellers are often on pins and needles in anticipation of the results. Recognize this method can be a risky move that requires plenty of research to understand fully. However, it's also a highly effective move that can yield positive results. Take some time to discuss this option with your real estate agent to understand the ramifications involved. This may be an effective tactic to get your chosen home under contract in a highly competitive market.
9) Position yourself to be flexible. As a home buyer in a competitive market, it is essential to stay flexible to meet any unique demands that the seller may have. Every seller has different needs. Sellers are looking for the least amount of contingencies and delays as possible. If you have a home to sell, consider selling your home and renting an Air BnB or short-term rental to give yourself flexibility. This can be a risky move with limited inventory, but it might give you the edge you need to entice the seller to accept your contract.
10) Use a well trained agent. If you end up stuck with an agent who is inexperienced in a competitive market, you may waste many months missing out on great homes. Instead, be sure to choose a well trained agent who has great support systems in place and knows the current market very well. The agent you choose will have a direct effect on your success in buying a home. Don't underestimate their influence and ability. Not every brokerage firm takes the time to train their agents and invest in their success.
As a home buyer in a competitive market, you will experience stress and pressure each time your offer is rejected. Watching other buyers win homes that you wanted to buy is disappointing and upsetting. I hope this article makes you feel empowered the next time you make an offer on a home. These tactics range from mild to aggressive. Stay positive and eventually you will secure the right home for you and your family. Choosing a Shaffer agent is a wise choice in this market. Our agents receive top notch training and on-site Broker support. Using a Shaffer agent will give you the edge you need in this competitive market.
As always, we are here for you. Sign up on our website to begin shopping for your dream home today. See you soon! Warmly, Susan