Walk into any real estate office right now and you’ll hear the same thing; inventory is rock bottom low. Finding a house right now is historically difficult, because there just isn’t a lot on the market. This puts more pressure on the already competitive spring market. Homes are receiving 10 offers or more, and it can feel like a battle. If you’re looking for a house, this can be especially intimidating. How do you keep a competitive edge in a market this hot?
Start looking early
It might seem too late to act on this advice, seeing as April is already flying by. However, no matter what time of year, if you’re thinking about buying a house it’s imperative to start early. Even if you don’t think you’re going to buy for another 6 months, you’ll learn what to look for, what your non-negotiables are, and get a realistic view of what’s out there. Getting a feel for the market will prepare you to move fast when you find the perfect home.
We can’t talk about winning a bidding war without talking about financing. Talk to a loan officer before you start looking. Get pre-approved for a loan if you can. You’ll want to have your budget locked in before you start making any offers. What are the keys to a competitive offer? Larger down payments are always a good bet. If it is feasible for you, a cash offer will always look sweet to a seller.
Escalation clauses are a great tool to have when you’re in a competitive bidding situation. This is a line in a contract that states that you will go above any other offer, usually with a cap. Say you’re looking at a $250,000 house. You might put in an offer at $253,000 with an escalation clause that states “Buyer agrees to pay $1,000 more than the highest offer received by the seller, not to exceed a sales price of $257,000”. This means that if the highest offer is $255,000, you would ostensibly get the house for $256,000. Using an escalation clause can increase your chance of winning in a bidding war, but it’s not guaranteed.
Know Your Seller
The most important strategy to securing your dream home in a competitive market is knowing your seller. Yes, money is a motivating factor in all deals, but often there is a linchpin in the seller’s circumstances. If you can find this key point, you can often accommodate for it in your offer and seal the deal. This is where having an experienced agent on your side is so helpful. When writing offers, I will call selling agents and have a conversation. They’ll often drop a nugget of information that I can use to write a killer offer. For example, I once worked with a seller whose worst case scenario was having to move twice. He gave $10,000 leeway on the price so he could rent back and didn’t have to move. It’s those little details that you find through conversations that can make all the difference.
Yes, the market is crazy right now. But don’t let that deter you from getting out there. With the right resources and knowledge, you can be successful. Kathryn and I are more than happy to guide you through the process. We’ve got everything you need to get that dream house!