How to Make a Winning Offer in a Competitive Real Estate Market
Competitive housing markets can make finding a home feel impossible. While things tend to be fairly dynamic and fluctuate over the years, the market has been heating up in the last few years, and properties are scarce. Today, it’s a competitive seller’s market, and buyers need to be prepared to make a winning offer that stands out to help them close on the house of their dreams. To help, here are a few of the most important tips to help you gain attention among a sea of prospective buyers.
12 Tips to Stand Out in a Competitive Market
Buying a home can be stressful in a buyer’s market. When available properties decrease and competition increases, things can get even more hectic. Whether you want to make an offer on your dream home or are looking at ways to prepare yourself for the challenge, it’s important to be strategic. To stand, consider the following tips to help you make a competitive offer in a seller’s market.
1. Start with a Competitive Offer
A higher offer on a house will always get more attention than a lower one, but it could also be the deciding factor in a highly competitive market. If you can afford it, and the home is worth the extra money, consider going above the asking price. When you increase your offer above the sale price, you increase the likelihood that the seller will take notice and choose you among other buyers. It also gives you a leg up to win a bidding war if one were to occur. On the contrary, you won’t be taken seriously if you can’t match the full-price offer in a hot market, so try to stick to homes within your budget to avoid wasting time. Understanding the market value of the properties you’re interested in can help streamline your home search. If you’re not sure about the average purchase price in a certain area, partner with a real estate brokerage firm or a certified realtor.
2. Make a Cash Offer
To make your offer even more attractive to sellers, bid with cash. Although it’s not always possible, submitting your offer in cash will give you an edge when a house has multiple offers. Cash offers show that a buyer is extremely qualified and has the potential to ensure an expedited closing with no complications. They can also decrease extra fees and interest associated with working with a lender.
3. Get Pre-Qualified and Show Proof
Another option is to be diligent and get pre-qualified for a mortgage. This shows the seller that you’re motivated to follow through with an offer on a home, and it helps you better understand what you can realistically afford. Doing it in advance also allows you to shop around for the lowest interest rates rather than trying to scramble to get the paperwork when you’re ready to make an offer.
Generally speaking, the pre-approval process takes about two weeks, so do it ahead to strengthen your offer and stand out in a seller’s market. Make sure you stick to houses with an offer price in your budget once you get pre-approval.
4. Wave Contingencies
Contingencies are clauses many buyers include in their offer to ensure that certain conditions are met if your offer gets accepted. The most standard contingency clause is a home inspection, but there are additional contingencies that may be included when you submit an offer. While you might not necessarily want to buy a house without knowing if there’s structural damage, you can wave certain contingencies to help position your offer more favorably. However, this is always a risk, so discuss it with a trusted real estate agent beforehand.
5. Offer a Bigger Earnest Money Deposit (EMD)
An earnest money deposit (EMD) shows the seller you’re a good-faith buyer. It shows that you’re committed to moving forward if you get your offer accepted. Luckily, the EMD is going to be applied to the purchase amount during closing, so it’s not a wasted effort. Just make sure you talk to a real estate broker to understand what situations would warrant the seller keeping your EMD to avoid throwing money away.
6. Make a Larger Down Payment
Prospective homeowners should also be prepared to make a larger down payment to secure a home in a competitive market. Larger down payments show a stronger financial ability, which is extremely important in a competitive housing market. If you can make larger down payments using your savings, it means that you’re going to need to borrow less money. Conversely, it can allow you the opportunity to take out a larger loan.
7. Try to Limit Extra Asks
Finding the home of your dreams can be difficult, so if it does happen, try not to over-complicate the sale. Don’t ask the seller if the offer comes with furniture (or don’t ask for it to be included) unless it’s already specified. A clean offer without extra asks can help your offer stand out.
8. Include an Escalation Clause
When you include an escalation clause, your home offer is automatically increased (up to a predetermined maximum amount) if another buyer outbids you. This can help you make your offer stronger and increase the likelihood that your offer is accepted, but it can also result in a much pricier home. Always consider your offer and how high you’re willing to go to get a house off the market. Staying within your budget is essential to helping you maintain financial stability over the years.
9. Offer to Pay All Title Insurance Fees
In most states, sellers are responsible for the buyers’ title insurance. These fees tend to range from $500 to $1,500, depending on the state. Although this practice may be changing soon, you can become more attractive to a seller in a multiple-offer situation if you pay the title fees yourself. This helps release the burden off individuals selling their homes and can help expedite the closing date.
10. Work Within the Seller’s Terms
The seller may have specific terms or conditions that they want met when selling their home. For example, maybe they aren’t able to vacate the property until a few months after the initial offer has been accepted. If you’re flexible, try to work within their terms to ensure your offer is seriously considered. In a hot market, they have the power to move to the next offer if you’re not willing to work with their requests.
11. Remain Polite Regardless of the Outcome
While it’s not uncommon for the best offer to win a house, many sellers still consider character. Throughout the entire process, try to be kind and avoid negative behavior. You may even want to write an offer letter explaining your situation or circumstance and why the house means so much to you. Even if they don’t accept your offer and you don’t get the home, it’s good practice to treat everyone with respect.
12. Work with a Seasoned Real Estate Professional
Every seller is unique, so how to make your offer stand out can vary. Oftentimes, you need to get creative if you want to be taken seriously and find the right home for your needs. Work with a real estate agent to help make your offers more appealing. A real estate agent can help you craft your offer letter for a home and get noticed. Just make sure you’re clear about your budget, housing needs, and timeline from the start.
Trying to navigate the homebuying process can be complicated, but in a seller’s market, it can get frustrating quickly. To help you craft a strong offer and increase your chance of finding a new home that works with your budget, partner with the real estate agents at First Star Realty. With insider access to listings, you’ll be more likely to find a home in your desired price range and neighborhood. We aim to bring you peace of mind when buying a home in a seller’s market so you can feel secure and supported throughout the process. When you’re ready to find your dream home, regardless of the market status, contact the team of seasoned real estate professionals at First Star Realty. Call us today at 479-267-1600 or fill out a contact form on our website.
