Homebuyers, both first time and move up, must have an offer strategy in today’s seller’s market. This strategy is not about trying to negotiate the best price; it is simply about beating out the competition and buying the home. It may be difficult to understand until you have lost a few homes to better offers. The reality of the situation is that there are not that many homes on the market and the competition is simply, fierce. Winning tactics are necessary.
Things that work in a buyer’s market will not work in today’s seller’s market. The shortage of available homes for sale has led not only to very short market times, but also multiple offers well above the listing price. Perhaps a better description of the list price could be “starting bid price”. Buyers that are resistant to this market trend, especially in entry to mid level price ranges, tend to lose out multiple times before they pause to reassess their strategy, or temporarily drop out of the market.
Buyers must be strategic if they want to successfully find a home. Here are some thoughts that may be essential to a winning offer.
- Unless you are paying cash, you need to get pre-approved. REALTORS® and financial advisors have been saying this for decades, but it is critical now. There are plenty of reasons that benefit the buyer, but most importantly, it is to show that a buyer is serious and has gone through the effort to have a lender run credit, verify income, expenses, employment and credit.
- If the home is fresh on the market, in a desired location and price range, you need to assume there will be competing offers. You may never even get a counteroffer from the seller. You need to consider making your highest and best offer first, as if you will not get a second chance. This is more difficult for some people than others because of their bargaining nature. There is a saying these days ,”If you want to sleep on it, you may not sleep in it.”.
- Earnest money that accompanies a contract shows that the buyer is acting in good faith. The amount that might be customary may not be enough in a competing market. Consider two or three times what might be normal. Talk to your agent about what would make an impression on the seller.
- While contingencies will protect your earnest money from specific concerns like loan approval and inspections, the seller will look at them as ways that the buyer can get out of the contract and then they’ll need to put the home back on the market. If a seller is presented multiple offers, they might be prone to accept one with the least contingencies, especially, if the prices are comparable. Talk with your agent about how to keep the offer “simple”.
- There is usually a time period connected to the different contingencies to complete them. Shortening these times as much as possible limits the time the seller might feel they are in “limbo”.
- If you have the flexibility, you might express your willingness to move the closing and/or possession dates to accommodate the seller’s schedule. This could be an important factor in your favor and could be done in a verbal statement conveyed from your agent to the listing agent. Ask your agent to find out.
- In hopes of gaining multiple offers, seller’s sometime indicate they will be reviewing offers on a specific date. Talk with your agent about asking the listing agent “what would it take to get the house off the market today?”. You just never know.
These are things buyers should consider and discuss with their agent before they find the home that they want to buy. Otherwise, while you are formulating your position, another offer may be accepted before you even make yours. For more information, download our Buyers Guide.