Hearing the words “a seller’s market” can seem daunting to many homebuyers. Although buying a home in a competitive market isn’t easy, your homeownership goals can still be attainable. Below we share how to make your offer stand out in hot real estate markets:
Before you even start to house hunt, you should meet with a lender to get preapproved. A preapproval letter shows a seller that a lender has already verified your income and other required documents, and has approved you for a loan. This differs from a prequalification letter, which only states that based on the information you provided you could qualify for a loan. A preapproval letter proves to a seller that you are serious about your offer and a lender is ready to fund your loan.
If your dream house has already received multiple bids, you may want to put an escalation clause on your offer. This means you are making an offer at a set price and agree to escalate your offer by a set amount to beat out other offers with a max cap. For example, you make an offer of $400,000 with a $1,500 escalation with a cap of $428,000. If another offer comes in at $410,000, the seller can accept your offer at $411,500. If the escalation clause is triggered, you should request to see the competing offer. Be cautious because this method does tip your hand, and shows the seller what your top offer could be. So be sure to weigh all your options before choosing this method.
Speed is Key
Given the choice between a buyer who is ready and able to move in fast and one that seems to be lagging, a seller will most likely choose the one who is ready to move. If you have fallen head over heels for a home, you may feel tempted to waive all contingencies, including inspection, appraisal and financing. Be forewarned, this is a risky move. Instead of waiving all contingencies, shorten the compliance time. RPM’s Advance Approval® is one way to use speed to make your offer more attractive. The Advance Approval® program allows you to shop for a home with your loan already approved. Full approval can happen with fewer constraints and less stress caused by contractual timelines. The seller is looking to secure the sale of their home as quickly and as easily as possible. Help the seller out by completing all contingencies promptly.
Step Up Your Earnest Money
Earnest money is the deposit you make on a house when you write an offer. If you decide to back out of the deal, the seller gets to keep your earnest money deposit. So needless to say, the amount of an earnest money deposit can show a seller just how serious you are and just how much money you are willing to put towards proving it.
Write a Letter
Another way to make your offer stand out is to try to connect with the sellers on a more personal and human level. If the sellers live in the home, good chances are they loved their home and have shared many fond memories within its walls. Tell the sellers why you fell in love with their house and why you want to make it your home. You never know what may sway a seller’s mind, and your hopes for their home might just do the trick!
Just Close Enough
If your dream neighborhood’s market just seems too competitive, consider looking at the neighborhoods that surround it. Often times the desirable aspects of those neighborhoods will trickle over into the adjacent ones. Which means you most likely will have less competition and can probably snag a home at a better price too!
If you are purchasing a home and need to discuss your lending options, contact a loan advisor today to see how they can help your offer standout.