If you’re looking to buy a home, you might have noticed that the market is very competitive right now. Sellers have the upper hand, and buyers have to compete with multiple offers and bidding wars. How can you stand out from the crowd and win your dream home? These are my top 10 tips to WIN a home in a HOT real estate market:
- Get pre-approved for a mortgage. Don’t bother looking at homes without pre-approval. Homes are flying off the market faster than it can take to get pre-approved. Consider getting the highest level of pre-approval, a fully underwritten pre-approval. This means that the underwriter has thoroughly reviewed your finances, documents, employment, and taxes. The only thing that remains is for you to find a home.
- Have clearly defined home criteria from the location, style, layout, must-have features, and absolute deal breakers. Be flexible and willing to sacrifice some if needed, the perfect home does not exist. Even with brand new custom builds, there will be things you wish you would’ve done differently.
- Be first. In a competitive market, speed is critical. Homes can sell within days or even hours of being listed. You need to be ready to act fast when you see a home you like. That means being available for showings, having your documents ready, and making an offer as soon as possible. You don’t want to miss out on an opportunity because you hesitated or waited too long. Be the first to submit an offer, make it competitive in price and terms, set an aggressive binding acceptance period that the seller will have a very hard time turning down your offer.
- Be last, if you aren’t having success chasing newly listed properties, switch it up and look for the diamonds in the rough, homes that have been sitting for a long time but will still work for you. In a seller’s market, once a home goes beyond 2 weeks, the seller and house is in trouble. They will be more open to listening and negotiating on offers.
- Be ready and willing to compete! Your agent can help run a comparative market analysis on the home you want to buy. This provides recent sales data of a similar home in the same neighborhood which will paint the picture of where your offer price needs to be in order to be competitive. You’ll see data like how long did homes take to go under contract, how much did the winning buyers have to pay over the list price, and what’s the price range in comparison to the conditions of the homes. Now you have all the data you need to determine a price where you will be competitive.
- Bring a large earnest money deposit. The typical EM deposit is 1% of the purchase price. However, in a hot market, you may need to do 2% or 3% to make your offer stand out as a serious buyer. If you want to make your offer even more enticing, make your earnest money non-refundable! Of course, make this decision at your own discretion.
- Be flexible with your terms. Sometimes, it’s not just about the price. Sellers might have other preferences or needs, such as a quick closing, a rent-back agreement, or a contingency-free offer. If you can accommodate their requests, you might have a better chance of having your offer selected.
- An offer with no contingencies is a seller’s dream. However, removing an inspection contingency is not recommended no matter the age of the home, even brand new. However, at your discretion, you can waive the inspection. If you don’t want to waive inspection, you can be creative and choose to put a cap on the cost of repairs. For example, any issues under say $2,500 will be a non-issue, anything that is over that amount can be negotiated, if no agreement is made you can cancel and keep your earnest money. This sets the expectation to the seller that you won’t nitpick minor things like a runny toilet, leaky faucet, loose door knob, or broken window, and only be concerned about major costly issues such as foundation, roof, or HVAC.
- Provide an Appraisal Gap Protection. In a hot market, buyers often have to overbid each other to win. This can cause a potential problem with appraisal. If a buyer offers more than what the appraiser thinks the home is worth, typically that means the buyer and seller have to renegotiate the price. However, in a hot seller’s market, buyers are offering appraisal gap protection, where the buyer is offering to cover the “gap” or difference between the appraised value and the agreed purchase price.
- Work with a local agent. A local agent knows the market, they have a pulse on what’s actually going on in the neighborhoods and sales trends. They can help you find the best homes for your needs, and budget, and advise you on how to make a strong offer. As well as you can leverage their network to have access to the best professionals like a loan officer who is able to provide you with the best loan program for your situation.
Good luck, armed with these tips you should be able to successfully win yourself a home. Keep in mind that as agents, we can only do so much to help our clients put together the best offer that they can. It is up to you the buyer to decide on how much you want to pay and what terms to set in your offer. It helps to be coachable, open-minded, and receptive to your agent’s advice. Even after you’ve come up with your price and terms. Ask your agent what their honest opinion of your offer’s success rate is. They’ll be happy to let you if you have a good competitive offer or if you should improve. Thank you for reading, if you have any questions or comments, drop them below. Happy house hunting!