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HOW TO WIN A HOME IN A COMPETITIVE MARKET WITH MULTIPLE OFFERS
Dated: August 31 2019
HOW TO WIN A HOME IN A COMPETITIVE MARKET WITH MULTIPLE OFFERS
The last three years have been a great seller's market here in Richmond, VA and probably most of the country. Inventory has been very low, and we have seen houses swept off of the market in less than a day with multiple offers increasing the contract price over list price. The market has shifted slightly in Richmond, VA, but there are still areas where the competition is fierce. As a buyer, how do I win the house of my dreams in one of these areas that continually have multiple offers? The first thing you want to do is get yourself an experienced Realtor. Don't just go with your sister's friend because she is new in the business and needs a sale. The next thing you will need to do is get yourself a solid local lender. Your Realtor should have a list of lenders and contact information to provide you. Don't just talk to one lender. Talk to at least three lenders. See what programs each one has, rates, closing costs, and pick a lender that best fits your situation. If you are able to qualify for a conventional loan, that is the preferred loan (besides cash) in a multiple offer situation. There are fewer restrictions regarding the appraisal as opposed to FHA and VA loans that could request that the seller fix additional items to make the sale close. Get a prequalification letter and make sure they check income, taxes, assets, employment, and credit. If they can provide you with an underwriting preapproval that is even better.
Now that you have your awesome Realtor and prequalification from a lender find the area you want to settle down in and make sure you know what you want. The last thing you want to do is get caught up in the competition of a multiple offer situation and then have buyer's remorse that you overpaid. Knowing what you want in a home will make you more confident and aggressive to make a strong offer on the home of your dreams.
If you see a home that you think might be your dream home, do not take your time in seeing it. Contact your Realtor right away and see it as quickly as possible. In these competitive areas hours can be the difference between getting a house under contract or having another 1,2,3 or 4 additional buyers involved. Your Realtor should provide you with all of the comparable home sales, homes under contract, and active homes in the neighborhood. If there aren't many sales in the neighborhood they should stay as close to the subject property as possible to find similar neighborhoods, with similar homes in size, age, and condition. If the home is priced at market value AND it's the home of your dreams, you should go in at full price and pay for closing and make it a done deal. If you play around too much trying to save a little here or there, trust me, someone else will come into the picture and pay full price. Some pricing strategies these days are to price a home at a lower value to get a lot of offers at one time. As long as your Realtor's valuation of the property comes in at the list price, go for it! This is where a lot of buyers lose out on a home because they want to get a deal. It is still a seller's market, and the deals of 10 years ago with foreclosures are a thing of the past. If you don't offer full price the seller will likely wait until the open house that weekend and wait for multiple offers to roll in.
If you do get into a multiple offer situation there are different things you can do to make your offer stand out. As I mentioned before getting a conventional loan will give you an advantage over an FHA or VA loan. Getting an underwritten preapproval instead of prequalification is another thing to set your offer apart from the others. Sometimes I will have my clients write a personal letter to the seller to let them know how much they liked their home, how well they maintained their home, and how they will continue to take great care of their home. I normally do this is the seller has lived in the home for at least a few years. You can add an escalation clause into your offer. For example, the list price is $350,000. You offer $350,000, but you will pay $2,000 over the highest offer up to $360,000, and if this clause is activated the seller has to send you a copy of the offer that caused the escalation. This allows you to acquire the home without overpaying. There are some instances where the seller will request highest and best without an escalation clause. You will want to put your best foot forward with your offer and your A Realtor can guide you. After all, the home still has to appraise for the contract price. I recommend checking with your lender to see what the difference in monthly payment would be between the offers you are considering making. Some buyers won't go up to $5,000 to get the house of their dreams, but in reality, it would be the difference in not going to Starbucks one day a month. When you can compare things side by side, it puts things into perspective. Also, remember the average American stays in their house for around 7 years. The likelihood that you will actually pay off the full 30 years is not as likely as in past generations.
You can remove other contingencies to make your offer more attractive. Here are some examples. You can decrease the number of days for the inspection. You can waive the appraisal contingency with a waiver from your lender (you normally have to have a large deposit in this situation). You can write in additional terms that you won't ask for any line items on the home inspection that are under $250,$500, $1,000 or whatever amount you decide. If the home looks to be in good shape you can forgo the home inspection and purchase the home "as is" with the contingency that if the home inspection is not satisfactory to you that you can back out of the contract. This would allow you to potentially win in a multiple offer situation, but still, have an out if the home inspection came back with a lot of high dollar items. You can find out what the seller's situation is as far as the closing date. Maybe they don't want a 30-day close, they want a 60-day close. The fewer contingencies the contract has, the more likely the seller will be to accept the offer even if it's not the highest offer. Do I recommend all of these in a multiple offer situation? No. It would be a case by case basis. Maybe you can't do an escalation because you are at the top of your budget. You could mix some of these other suggestions into possible win the house. If it's not the house of your dreams, I would be cautious in a multiple offer situation. You don't want to get caught up in the competition, just for the sake of winning. Make sure you really like the house. Take caution when choosing any of these suggestions and talk to your Realtor about the ramifications of choosing any of these. The house may not have any major repairs, but it may need 20 repairs that are under $250. There is a risk to some of these suggestions, and that's why they can work in changing the mind of a seller.
Richmond Home Sales At EXP Realty
Licensed Realtor in the state of Virginia
Are you looking for a realtor who cares more about you than their commission? I became a Realtor because I bought my first house about 7 years ago, and I absolutely loved the process. As a first tim....