In real estate, competition can be stressful for buyers. Understanding the best practices for home buying in a competitive market can help ease that stress.
So, how can you get a leg up in a seller’s market? Firstly, you’ll want to be prepared. Here are a few questions and tips to help buyers navigate the process of purchasing a home in a seller’s market.
What is a seller’s market?
Real estate markets are cyclical, meaning that home prices and interest rates inevitably rise and fall as the economy shifts. Depending on which cycle we are currently in, either buyers or sellers can have the upper hand.
In a seller’s market, there are more buyers than there are properties for sale. This leads home prices to rise and multiple offers become the common situation.
Will I know if I’m in a multiple-offer situation?
It typically works to a seller’s advantage if buyers know they are competing against one another. However, a seller must give permission for their agent to disclose the existence of other offers before this can be shared with the buyer’s representative.
Tip: Make your best offer first. Anticipating a multiple offer situation can help you come out ahead. By offering your best offer first, you aren’t taking the risk that the seller might counter-offer or reject your offer due to higher offers.
How will offers be presented to the seller?
The seller typically decides how they want this handled – either individually or as a group presentation. Once presented, a seller can accept or counter one offer, reject all offers, or reject all offers in conjunction with a request for the buyers to re-submit their best & highest offer.
Tip: Write an offer letter. All offers may look the same on the surface. In a situation where the seller has multiple offers to consider, an offer letter (or personal note) may be the thing that sets your offer apart. The ideal offer letter is short & sweet, as the goal is to connect with the seller & persuade them to accept your offer. In a few paragraphs, you’ll want to tell the seller why you fell in love with their home and why they should sell to you.
If my offer has the highest price, can I be confident that I’ll beat out other buyers?
Not exactly. Sellers can accept any offer they consider to be the “best”. That may be based on other factors, like the certainty of the buyer’s financing or flexibility on closing dates.
Tip: Keep your offer simple. Most offers will include contingencies (like completing inspections or receiving a mortgage approval) that need to happen for the transaction to move forward. When looking at offers, sellers tend to view contingencies as opportunities for the deal to fall apart. Because of this, sellers are more likely to accept an offer that reduces the risk of potential hang-ups in the process. However, don’t remove a contingency for the sake of competitiveness if it puts you in an uncomfortable position. It’s crucial that you feel comfortable moving forward when you’re putting in an offer.
What are my options for writing a stronger offer?
Most lenders will offer full underwriting approval in today’s market. This leaves only the property-related conditions to be cleared before you are clear to close on the home. Having your loan fully underwritten will also allow you to close faster, which gives you a competitive advantage if the seller is looking to get the process done as fast as possible.
Tip: Have your pre-approval and/or proof of funds ready. For truly hot markets, you might only have a day or two to get your offer submitted after viewing the home. In order to be “offer ready”, it’s crucial to have any supplemental paperwork to prove to the seller that your offer is secure. Mortgage pre-approval paperwork and proof of funds for the down payment are examples of this.
How can a buyer’s agent help?
Every home buyer benefits from having a REALTOR® in their corner. In a multiple offer situation, they can help you anticipate each step of the process and improve the likelihood of a successful outcome.
Team Melton is ready to help you with the home buying experience. Our team of professionals has over 50 combined years of real estate experience to assist you through every step of the process.