The housing market is currently a seller’s market. The record-low mortgage rates coupled with low housing inventory have buyers competing for a home. Buyers are not only having to deal with the steep competition when it comes to offers, but they are also running into rising home prices. Here are six strategies for a buyer to follow that might help get their offer accepted above the rest.
1. Include an escalation clause.
An escalation clause is a great way to keep up with the competition of offers coming in on a home. Instead of making a bid of $50,000 over asking, you can include an escalation clause that lets you increase your offer incrementally. This clause will only kick in after you have been outbid by another offer and will not go over the agreed set limit.
2. Get a fully underwritten mortgage approval first.
A seller is more often going to choose an offer with a buyer that has a preapproval letter. Take it a step further and obtain a fully underwritten approval to set you above the rest.
A fully underwritten offer will definitely stand out and will help reduce a seller’s fears of a contract falling through due to financing. According to Redfin, a buyer improves their odds of winning a bidding war by 66% if they waive the finance contingency.
Programs such as Embrace’s Approved to Move™ will help a buyer with the process of getting a fully underwritten mortgage approval. Buyers can submit the required paperwork and documentation upfront and a lender will verify the information and process and underwrite the buyer’s loan prior to finding a home to purchase.
3. Make a cash offer.
An all-cash offer is a seller’s dream. Redfin reported all-cash offers increase your chances of winning a bidding war by a 290%. An all-cash offer can close with speed and ease. In fact, sellers have accepted lower cash offers over a higher offer with a finance contingency. A study by the University of California-San Diego revealed that a cash buyer pays 12% less than a buyer who uses a mortgage.
4. Write a killer offer letter.
A seller might like to see a personal side to a buyer. Many sellers today are writing offer letters. In the letters, the buyer writes directly to the seller and lets them know how much they love the home and how it would be perfect for their family. If a seller is emotional about the house, this might intrigue them when choosing an offer.
5. Remove contingencies (within reason) to get your offer accepted.
The more contingencies the less attractive the buyer’s offer is to a seller. The most obvious which has been mentioned is the finance contingency but there are more contingencies a buyer can eliminate from an offer. Buyers today are also choosing to remove are the appraisal contingency and the home inspection.
6. Offer a rent-back.
It is often hard for a seller to sell and purchase a home in a timely manner. It might take pressure take some pressure off a seller to rent their house back to them after closing. This transaction is called a lease-back or rent-back.
If you are looking to purchase a home or sell a home in this market, talk to a Realtor. A professional sales agent will know the market and how to navigate it.