Winning strategies for homebuyers in this tight sellers’ market
RE/MAX of Michigan
Buyers armed with the right strategies and a professional agent have an edge in today's real estate market
If you’re looking to buy a house this year, you should expect to have competition. Probably a lot of it. In fact, “the first thing I tell my clients is they more than likely will be getting into a bidding war,” said Vicky Sowden, a Realtor with RE/MAX of Midland.
These days, the asking price of a house seems more like a starting point than a cap. The residential real estate market is full of stories of people making offers high above list price and still getting beat out by another buyer.
So, you can put aside any fantasy of getting a sweet deal on the house of your dreams. However, there are some winning strategies that buyers can use to get the house they want in this tight sellers’ market.
For example, Sowden just helped a client buy the house they were after by letting the seller dictate the timeline for possession. Although her buyer’s offer wasn’t the highest price compared to other offers, it was the offer that best satisfied the seller’s needs.
“The seller could tell us what day they wanted to close (on the sale) and how long they wanted occupancy for,” Sowden said. “If you have flexibility on occupancy that can make a difference. Price isn’t always the clincher.”
Here are three more strategies to consider when shopping for a house:
Get your financial ducks in a row
Get pre-approved for a mortgage and, if you’ve been house shopping for a while, make sure your pre-qualification letter is current. If you can’t show that you’re able to afford the house, the seller isn’t going to waste time on your offer. In addition to getting pre-approved, offer a bigger down payment if you can, or wait to look for houses until you can save up enough money for a larger down payment. The typical seller tends to feel more comfortable with a higher down payment – or a higher earnest deposit – because it shows you have the financial wherewithal to complete the purchase even if something unforeseen comes up.
Offer above asking price
Even if you’re approved to finance a $250,000 house, you might want to look at houses priced between $200,000 and $225,000 so you have some wiggle room to go above the asking price. You might even consider including an escalation clause in your offer. Similar to an eBay auction, an escalation clause automatically increases your offer – up to a pre-determined maximum – whenever another offer comes in higher than yours. “I want to make it clear to buyers that they’re going to be paying list price at minimum, so they’re prepared for that,” Sowden said. At the same time, “don’t get swept up in the moment” and make an offer you might regret, she cautions. “Sit here and think about how much you would be willing to pay for this house and then you won’t be disappointed if you don’t get it because you know that you wouldn’t have paid a penny more for it.”
Guarantee any appraisal shortage
Just because buyers are making offers above the list price in the current market doesn’t mean that the house will appraise for that much. In many cases, if the appraisal comes in lower, then the purchase price gets reduced to match what the bank is willing to finance. Sellers don’t often want to take that risk, so if a buyer guarantees that they will cover any gap between the purchase price and the appraisal then it’s more likely that the seller will accept their offer in the first place – even if it’s not the highest offer on the table. Of course, it may be a risky investment to buy a house for much more than it’s worth, but houses are moving so fast these days that appraisers often have a hard time keeping up with current market pricing.
What else can help get your offer accepted?
Don’t make an offer contingent on selling your existing house – You might need cash out of your existing house in order to afford a new house. But the typical seller doesn’t want to wait for a prospective buyer to sell their house first. Instead, if you can get financing to buy a new house before you sell your existing house then go ahead and do that (and don’t worry, because it’s very likely that your house will sell before you have to take on a second mortgage payment). You also could sell your existing house before shopping for a new house and find someplace to live and store your belongings in the meantime. Your offer will be much stronger if it comes without any contingencies.
Work with a professional real estate agent – While the current real estate market may be crazier than ever, having an experienced, steady hand by your side can make a huge difference. RE/MAX agents around Michigan have been serving home
buyers and sellers for well over 40 years. Working with an experienced, professional RE/MAX agent can help buyers make their offers stand out among the competition and ensure that they are represented fairly in the purchase contract.
“It has been challenging for buyers,” said Tina Johnson, an associate broker with RE/MAX United in Grand Rapids. “A buyer needs representation separate from the listing agent. A good buyer’s Realtor is going to advise them of all their options and help them make an educated decision.”
Here are some more home buying strategies to consider in the current market: