The housing shortage continues to drive the real estate market with sellers receiving offers almost immediately after listing their home…often well above the asking price.
Unprepared homebuyers are losing out to buyers with deeper pockets or those savvy enough to present an offer that is more likely to “win” the home.
A typical story…
A buyer family currently owns a modest home that will sell easily. They have strong financing, been pre-approved for a mortgage and hope to upgrade to a larger home that will accommodate their growing family. This morning their Realtor notifies them that a home has become available in one of their target neighborhoods. They visit the home immediately after work that same day and decide to make an offer. During the visit, the Realtor is informed via email or text that the seller has received multiple offers and all buyers must submit their “highest and best” by 9am tomorrow.
This fast-moving market has been driven by buyer demand, low mortgage rates and tight housing inventories. It is an extremely competitive environment with a large number of prospective homebuyers making up the buyer pool. As a result, buyers must be prepared to act quickly once they find the right home. Otherwise, they may not be moving any time soon.
Successful homebuyers have been increasing their budgets, decreasing their expectations, and even waiving standard contingencies like the home inspection…but be careful. These are practices to consider when making an offer on a home.
If you like the home…so will someone else!
It’s inevitable, if you are willing to make an offer…so are others. Gone are the days when buyers could take a few days to consider the purchase and make a second visit to the home before making an offer. In this market you must be prepared to make an instant decision.
Be prepared! Well-maintained homes that have been priced appropriately can sell in the first few days on the market. If you really like a property, make sure you have an offer ready. The listing agent/homeowner likely won’t wait long, especially if there are other interested buyers.
Low-ball offers? Forget making an offer below the listing price. Unless the home is grossly overpriced or requires too many expensive updates, a “low-ball” offer has little chance of being accepted.
Waiving the inspection contingency? This has become a common offer tool which isn’t a good idea. While this may win a signed contract, buyers are placing themselves at risk of purchasing a “money pit”.
Current Mortgage Pre-approval. Make certain your letter from the lender is updated. These letters normally expire after 60 days and may not be easily obtained when needed.
Appraisal Guarantee. This is a way of assuring the seller that you will personally pay, in cash, the difference between the accepted offer and the home’s appraised value as determined by your mortgage provider. Paying more than the home is worth is a good financial strategy only as long as you plan to live there long enough to see home values rise.
Your down payment. The more money you can put down, the better. This tells the seller that you are a serious buyer with strong mortgage financing. However, you don’t want to overextend yourself by using all your savings to make an attractive offer. You want to have money set aside to furnish the home and pay for needed improvements after you move in.
Be flexible with your closing date
When a home is occupied, the seller will likely need time move out. It’s not unreasonable to expect the seller to move within 14 days after closing, but circumstances may require the seller to ask for 30 to 60 days before you can occupy your new home. Allowing sellers the flexibility to move on their timeline may possibly make your offer more attractive than the others.
