In a competitive housing market, no single strategy can guarantee success, but there are definitely ways you can strengthen your offer and make it more attractive to sellers.
1-Use an experienced Realtor
Purchasing a house is not only a complicated process, (purchase contract is made of 17 pages of attorney written legal stuff), but also expensive: for most people, it is the largest financial decision they will make in their life. That’s why you need an experienced Realtor who knows the market and can not only find you the right home but to save you money by negotiating purchase terms on your behalf. A local realtor, is also professionally connected and can recommend reputable lenders, inspectors, contractors and other service providers.
If you are new to the community, a local realtor can educate you on local schools, places to shop or different builders in each subdivision. They can provide you with the latest stats and comparative market analysis for the property you like to make an offer on and suggest a competitive offering price.
TIP: Most people don’t know but in most cases, your agent works for you, free of charge. Because it is the seller’s responsibility to compensate your agent.
2- Get pre-approved and provide proof with your offer.
Real estate market is competitive and nothing conveys seriousness as a buyer, both to your agent and to the seller, than getting pre-approved for a mortgage before starting your search. And nothing is more upsetting to a buyer than finding the home they love, only to get their offer rejected d by the seller because they were not already pre-approved by a lender.
How to get pre-approved for a loan:
Buyers often get surprised as to how easy the process can be. I always tell my buyers:”You can get pre-approved within 24 hours or 24 days. It all depends on you”. First: Have a phone conversation with your lender. He/she will ask you some general questions re your income, how long you have worked at your current job, downpayment you have saved, etc. Then he/she will send you an email with list of documents you will need to provide to him/her (Tax documents showing your income, latest pay stubs establishing that you are still employed, etc) and a link which will take you to their company’s website, where you consent to them running your credit. Once you ✅ accomplish those tasks, they will send you a pre-approval letter and you can start looking for a house 🏠. Yes, it’s that simple!
3- Use a reputable lender
Are all lenders created equal? Are all teachers, police officers, attorneys, electricians, etc created equal? The answer is “NO”. So, how should you go about choosing the best lender? Ask your realtor who he/she recommends. See, we help buyers and sellers buy and sell homes all the time. Almost 80% of the sales involve a loan. So, we see “The Good, The Bad and The Ugly” of the lending world. That is the reason we have a list of preferred lenders to recommend. Trust your agent on that one. Not Google or your best friend’s cousin’s buddy. Ask your agent.
4-Offer more earnest money.
Once you find a home which checks most of the boxes (it rarely checks all of them), you may want to write an offer. In your offer (your agent will write the offer for you and guide you through it) you are required to mention how much Earnest Money Deposit (EMD) you will put in the escrow if the seller accepts your offer. In Sacramento, it’s customary for the EMD to be 1% of the purchase price. By increasing that amount, your offer will stand out among others, if there are multiple offers. And that you are not just going around writing offers in the hope of getting one of them accepted. It shows confidence. Sellers prefer serious buyers.
Question: “Is there a risk that I lose my Earnest Money?” Not if you have a good agent looking over the transaction. I have never had any of my clients lose their deposit. Once I had my client “almost” lose his deposit and that was because of an incompetent lender. See #3 above.
5-Write a heartfelt letter.
When there are multiple offers on a property (which is quite common in a sellers’ market) and you are bidding against other buyers, a personalized letter can seal the deal and get your offer accepted. Most people have emotional connection to their homes and want to know that the new owners will appreciate its potential and reap the same joys and rewards.
You never know but it’s possible that you even beat another higher offer because of that connection, the seller felt to you.
TIP: Be specific about what you like about their home, like proximity to school or the hiking trail or the huge backyard.
Best Practice: Avoid any reference to your race, religious affiliation or politics. You don’t want to encourage the seller to violate the Fair Housing Act.
6-Be flexible.
We agents see it all the time that buyers who are more attune to the sellers’ needs, are more likely to get their offers accepted. For example, maybe your competition outbids you on a property by a few thousand $ but because you have the flexibility to give the seller a few extra days to remain in their house after closing, the seller choses to work with you. Or, on the flip side, maybe the seller wants to close fast on their vacant property and you offer them a fast close. This is another example where your agent’s skills in finding out the wants and needs of the other side, can be invaluable. And let’s don’t forget the ability of your lender to make a shorter than normal closing, happen.
7-Accept a reverse contingency.
A seller’s market is great if you are trying to sell your house. It means there are lots of buyers and you can potentially sell your house in a few days. Awesome! 😀 The flip side to that is that if those sellers are purchasing a house, they are going to have an equally hard time finding a house which fits their wants and needs. They fear that if they sell their house and are not able to find a replacement property, they can end up homeless.
This is when a “reverse contingency” can work. In this scenario, both parties agree that if sellers can’t find a replacement property within a specific time, then they don’t have to move forward with the sale. Yes, this extreme outcome is not an ideal situation for the buyers. But sometimes it is the only way to get the sellers to work with you and not your competition. Is there a risk that you pass up on some properties you could have bought while you were waiting on the sellers to find one of their own? Yes. Sometimes you have to be willing to take a risk, particularly when you are a buyer in a seller’s market.
8- Ask your lender to pre-underwrite your loan.
We already established why it is important to get approved before starting to look for a home. The pre-approval letter that your lender generated (and hopefully emailed to you) shows the seller how much your lender is willing to loan you providing you meet certain conditions. However, a loan which is “pre-underwritten”, is better because it means that your lender has reviewed your financials and is providing a guarantee that it will give you a home loan up to a specified price (providing there is no change to any of the reviewed financial information). In other words, a loan which is pre-underwritten, is less likely to hit any kind of snag and is one step closer to closing. A seller will prefer this kind of loan over a loan which is only in the stage of being pre-approved. So, if they have two offers, both offering the same price and terms, they might lean towards a “pre-underwritten” loan vs an “only pre-approved” loan.
This is just one more step you can take to make your offer more attractive to sellers.
9-Offer a rentback
Often sellers need to stay at the property after escrow has closed. In this scenario, they “rent the property back” from the new owner and become tenants in the house they used to own. We see a lot of this happening in this market where there is a shortage of housing inventory. To sweeten the pot and make your offer even more appealing to the sellers, you can offer them “free rent-back” which means they owe you nothing for staying at “your” property for a certain number of days/weeks. Your real estate agent knows how to handle this: A form called “Seller in Possession” is filled out and signed by both parties where the details of the “rent-back” is explained. Some of the factors in there might be 1- the duration of the rent-back, 2-how much if any the rent is to be 3-the amount of security deposit which may stay at escrow and released back to the seller when they move out. (I highly recommend that a security deposit is involved. You never know!) 🤷🏻♂️
The bottom line
In a tight housing market, very often you won’t be the only buyer making an offer on a property. That means you need every advantage you can get. These suggestions might seem small but they may go a long way showing a seller that you are willing to go the extra mile to buy their home. More often than you may realize, buyers with slightly lower $ amount on their offer, get their offers accepted, because their offer made life a little bit easier for the sellers. 🙌🏻
Having a great team on your side (your agent and loan officer) to give you the best possible advice during the process of buying your home, is very important to get your offer accepted and making you a home-owner. I always tell my clients: You hire me to give you good advice. That is my job.
