As of June 25, 2018, we’ve made some changes to the way our mortgage approvals work. You can read more about our Power Buyer ProcessTM.
You’ve spent hours at home (and at work, most likely) at your computer trying to find the perfect home. You’ve gone to more open houses than you can count. And just when you start to entertain the idea of renting for another year, you find it. You see the perfect home in the perfect area with the wraparound porch you always wanted that needs a little, but not too much, work. You call the seller only to hear that there are already three offers on the home, and your heart sinks. What’s a girl to do? Here are a few tips to help you stay ahead of the competition in a seller’s market.
First Things First: What’s a Seller’s Market?
A seller’s market in the housing environment means that there are more people buying homes than there are sellers. This can mean higher asking prices, quicker sales, more competition for homes and a slew of other things that make life harder for buyers.
To make matters worse, buyers have to compete with real estate investors who are out there not to find their perfect home with the wraparound porch but to flip houses and make money. These investors can and will pay cash if they see a home they think they can profit from.
Great; so what can I do about it?
Make a Strong Offer
People who offer cash are usually going to offer less than the asking price. While you may not be able to pay in cash for the home, you’re also not trying to buy multiple homes at once just so you can flip them.
Your real estate agent should have a good sense of what the property is worth. If the house already has an offer on it, your chance to lowball is long gone. Don’t forget: After your offer is accepted, you will most likely need to get the house appraised. This means an expert needs to visit the house and evaluate it based on factors such as structural damage, a fenced-in yard or an outdoor pool to estimate the value of the home. The time may come when it’s appropriate to bid above the asking price, but trust the experts helping you through the process and cross that bridge when you get there.
Write a Letter to the Seller
Yes. Write a letter. By hand.
Give your offer a personal touch to show the seller you’re a genuine person. Give them a better idea of who you are; show them you have ambitions for the house; tell them the ways you see your life evolving in it. This kind of connection sometimes makes the difference between losing a bidding war and coming out on top over an investor.
Be Flexible About Your Move-In Date
A lot of sellers in this kind of market are surprised by how quickly their home sells. You hear stories about it all the time: Someone puts their home on the market and has a handful of showings scheduled within the day. This is great for the most part, but it can cause some anxiety about what happens if they can’t seal the deal on their next home in time. So be flexible about when you move in, and allow the sellers to stay there a little longer, if needed. If you want the home bad enough, chances are you’ll be able to make arrangements for a place to stay until then.
Consider an Escalation Clause
If you’re confident the home will have multiple offers, you can add an escalation clause to your offer. This is kind of like the way eBay shows the current bid but asks if you have a maximum offer for the item if you’re currently the highest bidder. For example, if you put an offer of $200,000 on a home and you anticipate the bidding will go as high as $250,000, you could put in an escalation clause that states you’re willing to go up to $260,000. Just make sure you qualify for the higher loan amount before you set your maximum amount. And, have a contingency in place if the appraisal comes back lower than your contract offer.
Get Your Preapproval Letter
Get preapproved from a mortgage lender. Your preapproval letter (PAL) shows you how much home you can afford. It shows your real estate agent what price range they should keep their home recommendations in, and it shows the seller that your offer is already backed by a lender. A lot of real estate agents won’t even work with buyers without a PAL because they want to make sure they’re finding houses that the buyer is actually able to buy.
Buying season has already begun this year. If you’re ready to start your home search now, you can see if you’re approved online by using Rocket Mortgage. You can also talk to a home loan expert about your options. Just share some information online, and we’ll give you a call.
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