If you’re on the hunt for a new house this summer, be prepared for lots of competition. With inventory still tight and home prices on the rise in much of the country, it’s still a seller’s market in many places. Nationally, there’s a 4.7-month supply of homes for sale right now, according to the National Association of Realtors. (A six-month supply is considered a balanced market.) That means that a home buyer needs a game plan in order to stand out in a crowded field in order to get an offer accepted. Follow these steps to prepare:
1. Have your finances in order. Sellers still prefer to work with a home buyer who can make the purchase without a mortgage, since there’s no chance that financing will fall through. All-cash buyers made up 33 percent of sales in the first quarter of 2016, according to RealtyTrac. If you can’t pay in cash, you’ll need a pre-approval letter that shows you can secure the necessary loan. Meet with a lender to get pre-approved, which includes a credit check and income verification, before you’ve even started looking at houses. That will not only put you in a more competitive position, but it will also give you a sense of whether your budget is realistic.
2. Be aggressive. When you’re in research mode, you may spend months checking out open houses and pouring over online listings, but once you’re serious about making a purchase you’ll need to move quickly. In a sellers’ market, well-priced homes get offers within a few days, and if a home buyer waits too long, the opportunity could be missed. If you find a home you love and think it is fairly priced, make an offer that’s close to asking price. “Make your first offer an aggressive one,” says Jeremy Swillinger, an agent with Level Group in New York City. “You might not get another shot.”
If you’re buying the home with a mortgage, putting down a larger earnest money deposit, a specific kind of security deposit, can signal to the buyers that you’re in good financial shape and serious about the purchase.
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3. Eliminate as many contingencies as possible. There’s less incentive in today’s market for sellers to accept an offer with many contingencies. In particular, they’re likely to reject an offer from a buyer who can only close the deal contingent on the sale of an existing property. If you find yourself in that position, you may need to close on the sale of your current home first. “It’s all about making the offer as uncomplicated as possible,” Swillinger says. “It’s not just the price, but it’s also about the terms and eliminating any risks that could keep the buyer from getting to the closing table.”
Still, there are some contingencies that you need to keep in place, even if it slows down the sale. For example, you should never waive your inspection contingency (although you may be able to have one before you make an offer), and proceed with caution before waiving a financing contingency.
4. Be easy to work with. If you can’t or don’t want to compete by increasing your offer, you can be a stand-out home buyer by being flexible and responsive during negotiations. “If you’ve made an offer and there’s a deadline, you need to be by your phone,” says Tim Savoy, a sales associate with Coldwell Banker in Washington, D.C. “That’s when most of the fast-paced action happens, and most sellers are looking for a quick response.”
Sellers may want to close quickly or to lease back the property for a period after the close. Working with their timeline and be willing to accommodate their needs can make your offer more attractive. If you need an inspection, schedule it as quickly as possible and don’t nickel-and-dime over minor repairs.
5. Write a letter. For some sellers, especially those selling a family home that they’ve lived in for many years, the process can be an emotional one. Appeal to that by writing a letter explaining why you believe their home is the right one for you, and send it in along with your offer. “You want to make a personal connection with the seller,” Swillinger says. “Tell them why you love the property and how you can see yourself living there.”
The letter may not do much good if someone else is offering significantly more money than you, but if all other things are equal, a heart-felt letter may give you the edge.