By Alena KairysFeb 11, 2022
Note: This blog was originally published in December 2015 and has been updated.
In a seller’s market, it’s a dog-eat-dog world. When you’re competing with multiple buyers, all-cash offers, and offers over asking price, it can feel impossible to put in a winning bid. Despite the uphill struggle, succeeding in landing a home is possible with the right tactics. We share strategies to help you purchase a home in a seller’s market.
No matter what the market conditions are like, getting preapproved is an essential first step for buying a home, and it’s even more crucial in a seller’s market. A preapproval lets you know how much you’ll likely be approved for, and it gives you an idea of what properties are within your price range. Being preapproved also shows sellers that you’re a serious buyer who can secure funding. To get preapproved, work with a lender who understands your needs. Once you’re preapproved, you’ll receive a preapproval letter which will be valid for a period of time after it is issued.
Work With a Great Real Estate Agent
Working with a team of real estate professionals is key to getting your offer approved by a seller. It’s in your best interest to hire an experienced, local real estate agent during your home search. A seasoned agent won’t be deterred if there are several offers on a property and will understand the unique characteristics of the area. Make sure your agent is communicative and responsive; time is of the essence in a competitive market. Your real estate agent can also find out how competitive the listing is and what factors the sellers are looking for in an offer so you can tailor your proposal.
Trying to purchase a home in a seller’s market leaves little room for adding special conditions into your offer. It’s advisable to make your offer as appealing and accommodating as possible to make things simpler for the sellers. Reducing or removing contingencies is a common way to make your offer seem more appealing. When you waive contingencies on a home, it means you won’t be able to back out of the sale if there are issues found during the inspection. You also will not be able to ask the sellers to cover repairs before the sale is finalized. By asking for an informational inspection, the inspection will be more for your knowledge and safety than the basis for closing the deal. While this strategy can be effective, you should understand the risks that can come with it.
Being in a seller’s market isn’t just hectic for buyer’s it can be tricky for the selling party, too. For example, if the sellers haven’t secured a place of their own yet, they may need extra time to move out. Consider a rent-back agreement to be flexible to their needs. A rent-back agreement allows the sellers to stay in the home for a stated timeframe, while paying you a daily (or monthly) fee based on your mortgage payment. This means you’ll have to wait to move into your new home, but it gives the old family more breathing room during the transition.
Sweeten the Deal
When there are fewer homes for sale than buyers, many people put in higher bids to stand out. Unfortunately, this can create an appraisal gap, which occurs when a home is appraised for lower than the offer price. To give sellers reassurance, consider adding appraisal gap coverage. Increasing your earnest money deposit can also show sellers you’re a serious buyer.
Adding an escalation clause is another way to make your offer stand out. This clause states that if there is another offer that exceeds yours, your original offer will increase up to a certain amount. This shows you are committed to winning the sale because you’re willing to beat out other buyers with extra funds. It also protects your budget because it prevents you from entering a bidding war.
Go Under Budget
Sometimes you need to think outside the box to close on a home, and this includes looking at properties that are below your budget. Homes that are closer to your desired price range will typically receive multiple offers over asking price, which can force you out. By targeting lower-priced houses, you have more room to make a higher offer. This may involve looking at properties that need some TLC or are in a neighboring ZIP code. Who knows, you may find a few houses that you can imagine yourself being happy in!
A seller’s market can make many people feel rushed and stressed about buying a home, but try not to let those feelings cloud your judgement. You don’t need to settle on a home you aren’t interested in—just be open to possibilities. Always know what your financial limits are before starting the process to avoid feeling overwhelmed. Closing in a cutthroat market is a matter of timing, positive attitude, preparedness, and having an excellent team on your side.
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These blogs are for informational purposes only. Make sure you understand the features associated with the loan program you choose, and that it meets your unique financial needs. Subject to Debt-to-Income and Underwriting requirements. This is not a credit decision or a commitment to lend. Eligibility is subject to completion of an application and verification of home ownership, occupancy, title, income, employment, credit, home value, collateral, and underwriting requirements. Not all programs are available in all areas. Offers may vary and are subject to change at any time without notice. Should you have any questions about the information provided, please contact us.