Buyer Tips to Get Your Offer Accepted in A Seller’s Market
Hey Buyers, are you finding the market a little bit challenging in a hot “seller’s market?” Wondering what you can do to get the edge? In today’s seller's market, buyers have to be willing to act fast and do what it takes to “win the real estate foot race” to be considered a serious player.
What is a seller’s market? Generally, it means that there is more demand than inventory. In Silicon Valley we have an active economy which brings more future employees from other states and countries putting pressure on the housing supply to purchase. We have sellers that are barely recovering from the last real estate crash trying to make up for lost time and are not selling quite yet. Low inventory and cash buyers from foreign countries also make for a challenging buying environment. I have gone through several seller market cycles in my 29 year real estate career and want to give you my Top 10 helpful tips to buy in a seller’s market.
- Be Ready and Focused. "If you only look periodically without any consistency, you probably will not see the good deals,” says Jim Myrick, a real estate broker in Los Gatos and my office colleague. “You’re just a casual observer and not in the flow. It can lead to uncertainty and will make you frustrated!” Think of this process like you would for something meaningful, like hunting for a job or exercising. If you get a tip, jump on it and see if it is the right match. Consider focusing on the home search for a solid month, and, like exercise, you will start to see the trends of the market and your efforts.
- Be Prepared. To be taken seriously, buyers would be wise to get a pre-approved for a loan and have the "proof of funds" evidence to show they have the “cash to close.” Having it allows you to take action on the right home. Have the necessary down payment and closing cost funds in a local account. Schedule time to search to buy what is often one of the largest purchases you will make. I heard someone say once that we spend more time on planning a vacation than something as important as our home.
- Be Open Minded and Flexible. Search for homes outside the choice zip codes and neighborhoods if confronted with limited or high-priced homes. At some point you will get priced out of the target market so be decisive if you want that right area or school district. Buyers need to carefully consider what they're willing to compromise on. If a property is sitting on the market, there can be a reason that will eliminate most buyers but create an advantage for you. Those "issues" however, can be ones that you can accept or handle. You will likely have less completion if you are willing to do some repairs versus buying a completely remodeled home… and… build some sweat equity and add your own style and tastes too.
- Provide A Simple Letter. Create a simple one page letter with your photograph expressing why you want to purchase their home and why they should seriously consider (and choose) you! I would recommend it be straightforward and do not bet overly dramatic, which can then back fire on you. Believe it or not, some sellers are just as sentimental or emotional as you and want their house (their baby) to go to nice person/family.
- Know the competition. How many offers are you competing against? Who are the buyers? Are they investors, contractors or those that just want a nice home? The more offers, the more likely you will have to have a clean offer with the least contingencies.
- Reduce Offer Contingencies. In a seller's market, buyers may need to remove some or all of the contingencies to purchase the home. Sellers prefer the fewest number of conditions to closing the sale as possible. If you come in with several contingencies — such as "if" they get a loan, need appraisal, or want more inspections, then the sellers are more inclined to take another offer with less issues or hassles. If you have the necessary funds to close and can deal with the condition of the property, you may be able to manage the risk better than someone who has low reserves or can handle the conditional risks.
- Bring in a full offer package. I am amazed at how many agents, usually inexperienced, just barely give a purchase contract and agency form. How your offer documents get presented says a lot about the buyer and the agent. Top agents want to make sure the buyer and agent are serious, committed and earnest to buy the seller’s home without any major hiccups. What does the seller’s agent need to feel warm and fuzzy?
- What does the seller want? Believe it or not, money is not the only factor in accepting your home. Granted, more money is important, however it does not hurt to ask what the seller wants or is looking to do and see how you can accommodate them or make it easier for the seller to achieve it. Some considerations include a fast close, reduced risk, rent back to move out. Think win-win.
- What is the true value of the property in the area? Buyers often think that the list price is the sales price. Nothing could be further from the truth. For various reasons from the appraised values are lower ( they are historic values) to wanting to create more of as auction environment where prices are bid up, the list price may not truly reflect what is the real fair market value of the home. Check out what has sold recently (1-2 months max if possible) and see the trends. I often hear from buyers that they want to make an offer on a home only to find out that the list price was a “teaser” price.
- Work with a professional Realtor. I know it may sound self-serving, and yet, I see many buyers work with agents that have very little experience or skills. A real pro has real experience in the realty market, offer negotiations, finances and contract terms, to start. They are the real deal makers, looking at as many possible options to help you achieve your goal to purchase your home, not one who is hoping and praying your sloppy incomplete offer is accepted.
I know that the market may seem harsh at times and yet buying a home is not like buying a bag of potato chips, where they are all the same and cheap! A home is unique, has long term value, is often seen as a part of our persona and can be an emotional process for many. The seller is going to pick the best and strongest offer so don’t even think of testing the market or giving a “lowball” offer in this market. Having access to additional funds is always good but there are still plenty of successful strategies available to purchase your home if you are open to the possibilities.
Using some or all of the above techniques will definitely give you a better chance and allow you to do the “real estate happy dance” when your offer is the one that gets accepted. And, buying sooner than later often will save you money and time because, don’t forget, the winning bid means that the next sales price will be higher when that is established as the new comparable sale for the appraisal. Become a keen observer of the buying process, and, here’s to your happy house hunting!