Let’s not sugarcoat it. If you’re buying a home in a hot housing market, you’ll probably face some serious competition. What causes a hot housing market? It’s the classic tale of supply and demand. In a seller’s market, there are more buyers than there are homes for sale. This often leads to homes selling faster and for a higher price, giving buyers less negotiating power. But that doesn’t mean you’re powerless.
In a competitive market, the best approach is to Be Aggressive, B-E AGGRESSIVE! The key is to lead with your best offer. Don’t expect the seller to go back and forth negotiating with you. Remember, they have the upper hand. Make an attractive offer from the get-go to ensure yours doesn’t get tossed aside.
Be sure to get pre-approved* and find a superstar real estate agent before starting your home search. Need a referral to a great agent? Crown would be happy to recommend someone!
| Know what you want. Decide on your list of wants, needs, and deal-breakers ahead of time to avoid decision fatigue and allow yourself to move quickly. Once a home comes on the market that fits your criteria, be prepared to view it, and make an offer immediately. Make an offer above list price. Offering below list price is likely not an option when inventory is tight. If you know this could be a potential budget-buster, look for homes below your price range so you have room to offer up. This is where a great real estate agent is an invaluable asset. Your agent is there to help you get the home you want at the right price point, but they’ll also help set realistic expectations, whether that means walking away or going in with a higher bid. Waive contingencies. Contingencies, such as the appraisal or inspection, exist to protect the buyer, but in a bidding war, many buyers forego them to seal the deal. This can be a risky move, though, so talk to your agent about the pros and cons. Negotiate on timing. Does the seller want a quick closing? Include a closing date in your offer letter. Does the seller want to live in the property for a few weeks after the sale, until they can close on their next home? Be flexible on the move-out date. Put more money down. If the home appraises for less than the agreed-upon sale price, (which can happen when homes are selling above list price), you’ll need extra cash to make up the difference between the sale price and the loan amount. A larger down payment signals that you have cash on hand to do this and are more likely to have your financing approved, whereas a buyer with a smaller down payment may have to walk away from the deal. Include an escalation clause. This essentially tells the seller that you’ll beat the price on other offers, up to a certain amount. For example, you could outbid other buyers’ offers by $1,000, up to a max price of $350,000. |
| Buying in a competitive market can be intimidating, but it’s not impossible! If you’ve thought about putting off your home purchase until the competition dies down, consider this: While more inventory could come on the market in the future, that doesn’t guarantee a return to a buyer’s market. It’s also difficult (if not impossible) to predict which direction home prices and mortgage rates will head. Instead of trying to time the market, buy a home when the time is right for you. Fortunately, there are multiple financing options that may be able to help you afford the home you want. If you’re serious about buying, Crown’s recommendation is to explore all of your financing options now and get pre-approved. * That way, you’ll be ready to move quickly when you find the right home. |
*This is not a commitment to lend. Pre-approval is subject to certain conditions. Not all borrowers will qualify.