The housing market has become extremely competitive over the past few years, but you shouldn’t let that stop you from getting out of renting, moving on to your next home or downsizing. Below are a few tips so you have an edge over your fellow potential buyers. To keep it fresh, I’m avoiding any suggestions that may not be feasible for most, like an all-cash offer.
1. Do your due diligence beforehand.
Before you start looking, think ahead and know what you will compromise on and what you won’t. For you, the kitchen needing to be updated might not be an issue, but the house not having enough space for your dog might be. Think about what styles you do and don’t like. Doing this will save you time you may not have.
Another aspect is knowing what the housing market in your area looks like. Doing some of your own research will let you know what’s available and how much the average asking price is for the kind of house you’re looking at. This way, you’ll be ready to make a move when something you want becomes available.
The other essential part of being prepared is having a pre-qualification letter from your lender. This shows the seller that you’re serious about buying a home and that you have the qualifications to back it up. Along with that, having a pre-qualification lets you know what you can afford, gives you a better picture of your financial situation and the loan programs available to you.
Partnering with a real estate agent is also a key piece of the homebuying process. They can assist with locating homes you may have overlooked or have yet to hit the market. Agents are skilled in negotiating the best purchase terms that will fit your needs while at the same time making sure you’re protected when it comes to writing an offer and covering things like contingency time frames, inspection windows, clear title policy, inspectors, earnest money and much more.
2. Get to know the seller and their motivation for selling.
Getting to know the seller keeps you from just being another offer they have to sift through. If you build a relationship with them, share your own story and have a competitive offer to boot, it’ll be a two-pronged approach – financial and emotional. Very rarely are people selling a home without having formed some sort of connection to it. Find out why they’re selling the home, then decide on a plan of action for your offer. Write a letter to the seller so you can tailor your message more effectively and differentiate yourself from everyone else, and you might find that you have something in common.
3. Accommodate the seller as much as you can.
You’ve probably heard the current housing climate referred to as a “seller’s market”, meaning you’ll have to make more accommodations for the seller in order to compete. As I said previously, an all-cash offer isn’t a viable option for most. In this case, things like speed or putting more risk onto yourself can sometimes be more valuable than cash. For example:
- Offer the listing price upfront or offer more than the listing price
- Increase your earnest money deposit
- Shorten your closing date (i.e. 30 days instead of 45, or perhaps an even shorter window)
- Take contingencies out of your offer. Contingencies are typically put into offers to make it easier for the buyer to back out if necessary
- Use an escalation clause, which automatically tops other offers by $1,000. Just make sure you set a cap on it so it doesn’t go above what you can afford
Usually, the seller wants to wrap things up as quickly as possible, so addressing some of these parts of the negotiations can make you look very appealing.
Making the seller’s life easier is the key here. While some of the options above may not be within your capabilities, my point here is that there is more available to you than you might think.
