Are you thinking of buying a home in 2021? We’ve put together a list of 5 tips to help get your offer accepted in a hot market. Your trusted advisor is the best resource for up to the minute market intel and negotiation strategies but these 5 tips just might help seal the deal!
1. Be READY
Most buyers’ home journey begins with some casual browsing, perhaps cruising into a few open houses, and of course LOTS of time on Zillow or their real estate app of choice. This can be a great time to get a feel for the market and figure out what neighborhoods and home styles you like and dislike. Buying a home can be a bit like falling in love for many buyers… you aren’t ready for a relationship till you ARE when you meet “that special person.” Similarly, many buyers aren’t quite sure they are ready to buy until they walk into their dream home and picture their life within those four special walls. In our current competitive market, this casual approach often doesn’t cut it. Buyers end up heartbroken to hear that the home they just walked into already has 2 offers on the table and they don’t stand a chance because they are still days or weeks away from being ready to make an offer. This can be avoided by being ready!
2. Get pre-approved (or have a plan to liquefy assets)
Talk to a lender as soon as you think you might want to start looking for a home. This is crucial so that you know what you can afford and what price range to be looking at and so that you are ready to put in an offer quickly once you’ve locked eyes on your dream home. The pre-approval process can take several days or weeks depending on various factors (your type of income, lender’s workload, etc) so it is best to start the process and receive your pre-approval letter before seriously considering putting in an offer. If you will be paying cash, make sure that your funds are liquid or can be converted quickly.
3. Expect Competition
When you find a home you would like to make an offer on, expect there to be competition. Even if the property has been on the market for several months, you still might be competing against other buyers! There is a very strange phenomenon in real estate that frequently occurs when a property has been largely ignored for months (or years!) and when an offer finally comes in, it triggers one or more additional offers as well.
4. Short Contingencies
There are several ways you can make your offer as attractive as possible to the seller. Obviously the highest price and fewest contingencies is typically most appealing. If you are unable to increase your purchase price and not comfortable removing contingencies, consider shortening the contingency periods to make them as brief as possible.
5. Escalation Clause
One way to compete with other offers without over-paying for a property is through an escalation clause. An escalation clause is best explained as an e-bay style bidding system. In your offer, you will include a starting price, an escalation increment, and a maximum price. The escalation clause communicates that you are willing to pay x amount (the escalation increment) more than another buyer’s offer up to your maximum price. It is only triggered by a bona fide offer higher than your starting price.
The bottom line is that it is totally possible to get an offer accepted in this competitive market when you play to win. Talk to your advisor about how best to prepare so that you’re ready when your dream home comes along. Happy house hunting!