6 Ways To Success In A Sellers Market

Couple hugging after buying a home

The real estate market generally cycles through two stages, a buyer’s market and a seller’s market. In a seller’s market, inventory is low and demand is high, resulting in much more competition for each property. In addition, sellers have many more freedoms when it comes to asking price and negotiations. As a homebuyer, it can be very overwhelming as markets can shift almost overnight. When the market changes, your home-buying strategy needs to change with it, and time is of the essence. In a seller's market, you should always assume you're competing against several other offers. You must be prepared and ready to act quickly at any given time. You want every advantage and a smart strategy for positioning yourself ahead of other buyers to edge out the competition. Establishing that you’re a serious buyer, with the financial capabilities to meet all obligations, is the first way to a seller’s heart. But, be willing to go the extra mile, both in your intention and in your financial offerings, to ensure success in a seller’s market.

1. Enlist a Credible Real Estate Agent

Enlist a credible real estate agent

Having an experienced real estate agent by your side to aid you in making an offer quickly and negotiate effectively on your behalf is key. If you find that you are very interested in a home, your agent can get you property reports, disclosures, and offer due dates, as well as provide you with keen insights for specific neighborhoods, schools, and other local amenities. Pay close attention to upcoming open house dates, and if possible, set up a private tour with your agent. Your agent will also be able to communicate with the listing agents, find out what the sellers are looking for, and save them time by preparing the offer appropriately. The listing agent may be more inclined to recommend your offer over another whose agent did not complete the offer in the same way. Knowing what the seller is looking for from the beginning will increase your chances of getting an accepted offer.

2. Know Exactly What You’re Looking For

Know what exactly you're looking for

If you’re going to act fast, you need to know upfront what your non-negotiables are, what checks off the right boxes for you and what doesn’t. This includes key features like location, number of bedrooms and bathrooms, a home office, and whether you need a three-garage. It also applies to potential deal-breakers. Are you willing to buy a home that needs some work? What about a home that adds time to your daily commute? Knowing what you want, what you can live with, and what you can’t live with will help you quickly narrow down homes during your search.

3. Get Pre-Approved Financing

Get pre-approved financing

Anticipating a multiple-offer situation can help you come out ahead. You don’t want to be held up waiting for a mortgage approval or establishing your budget. Thus, one of the smartest things you can do to ensure your chances of getting the home you want is to apply for a mortgage pre-approval. It provides a competitive advantage as sellers are more inclined to go with a buyer who’s stable in terms of financing. Sharing your pre-approval letter will also show sellers you aren’t wasting their time, and that you’re motivated buyers.

4. Keep Your Offer Simple

Keep your offer simple

For the best success in getting an accepted offer, keep your offer as simple as possible. Consider the maximum amount you’re willing to pay, what compromises you’re willing to make, and how flexible you can be on your closing schedule.

Minimize Your Contingencies: Having too many contingencies complicate an offer and provide sellers with less confidence that a closing will actually happen. A clean offer should not be contingent on the sale of another property or have other financial constraints. Waiving certain contingencies may set you apart from the competition and help you win in a bidding war, but it is crucial that you feel comfortable with your decision and make sure you are in a strong financial position to take the risks. These risks are important to understand and your agent will be able to guide you.

Avoid Asking for Extras: Your offer should be free of concessions, things a buyer may ask for, such as help with closing costs, personal appliances or belongings, extended closing periods or discounts for home repairs. Your offer could be very similar in price to another offer that isn’t asking for concessions, and will weaken your chances against the competition.

5. Money Talks

Money talks

Again, in a strong seller’s market, you must always assume you are competing with multiple offers. Low home inventory increases demand and asking prices do tend to be higher. Therefore, it is imperative to make your best offer quickly and upfront.

Offer Above List Price: This is not the market for making low offers and hoping someone will bite. You need to make your offer strong enough to beat out a multiple-bid situation, and should consider offering above listing price, even if it’s just $2-3K, which will show the seller that you’re serious about buying the home. Keep in mind the maximum amount listed on your pre-approval, and work within those limits.

Make a Cash Offer: If feasible, making a cash offer proves that a buyer is serious and has the financial means to expedite closing. Cash offers allow the buyer to be in control instead of letting a lender dictate the closing process. If you don’t have to use a lender, there’s no financing contingency, showing the sellers that you will most likely not pull out of the deal due to financial issues. In addition, a cash deal leads to a quick and smoother sale, which is very appealing to the sellers.

Put Down a Stronger Earnest Deposit: Your earnest deposit is proof that you are a good-faith buyer. In most situations, the real estate broker will hold onto your deposit and it will go toward your down payment and closing costs. Typically, earnest deposits are about 1%-3% of the home’s purchase price. If you put down a larger amount, it may show that you are a serious buyer and that your intentions are genuine. However, if you do put more of a deposit down, be sure you intend to buy the home. If you don’t end up moving forward with the purchase, your deposit may be in jeopardy.

Make A Larger Down Payment in Your Loan Program: No matter what type of loan you choose, offering to pay more down is another sign of good faith to your seller. Anytime you can showcase that you’re in a good financial position, you should do so.

Don’t Counter: There are no counter offers in a seller’s market. Buyers really need to put their best offer on the table, as sellers won’t need to counter. They can pick and choose the very best offer.

6. Sweeten the Deal

Sweeten the deal

Just as an overcomplicated offer can potentially turn a seller off, a sweetened deal can easily make you the most attractive buyer.

Include an Escalation Clause in Your Offer: Adding an escalation clause means that your offer will outbid other offers up to a maximum price, and ensures you the best chance to be the highest bidder. Keep in mind, however, even if you provide an escalation clause, it may be in the sellers’ best interest to issue a counter-offer.

Offer Sellers the Gift of Time: Something as simple as some extra time might make your offer more appealing and give you the competitive edge you need to win the home. Buyers can help themselves by being flexible with dates and deadlines in a contract. A rent-back agreement is a great option for buyers to purchase the home and then rent it back to the seller to give them some time to find a new place to live, or a few extra days to move out.

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