You want to buy a house. However, the housing market is described as a “Seller’s Market.”
What does this mean? Generally the characteristics of a “Seller’s Market” are multiple offers from buyers, offers over asking price, all cash offers, short DOM’s (days on market), and some houses never go to MLS, meaning they are sold before being publically offered.
How do you compete so that your offer will win the contract? The answer involves having a strategic approach. Your requirements to “win” the contract are twofold.
First, recognize that the market in certain market niches is competitive and that you will be competing against other buyers. If you do not mentally approach your offer with this understanding, then you likely will lose before you begin. Buyers who insist that they “get a deal,” or they must buy below asking price, or that they need to take their time and analyze everything thoroughly, most likely will not win the contract.
Second, you must have a skilled and experienced real estate agent who knows the market, knows how to help you construct a competitive offer, knows how to interface effectively with agents of sellers, and has a history of winning contracts in competitive markets.
The reality is the market is NOT defined by the seller’s asking price, any more than a “good deal” is defined as buying below asking price. The market is defined only by what buyers are willing to pay, and it may be that a “good deal” is some amount over asking price, because all competitive offers considered by the seller happened to be over his asking price. This is not uncommon in a Seller’s Market.
When composing an offer, you should consider what would be the best possible scenario for the seller? Those answers might be;
- A contract at greater than asking price
- A rapid closing – the sooner the better
- Not having to repair anything – you buy “as is”
- Flexibility to find a replacement home
Things you might consider to make your offer more competitive are;
- Offer more than asking price – the amount “over asking” should be whatever you feel might win the contract.
- Offer all cash. If you cannot do all cash, then offer enough cash so that the seller has more confidence in escrow closing.
- Submit proof of being prequalified for the required mortgage.
- Offer a larger earnest money deposit to give the seller greater confidence. The larger earnest money deposit is still a part of your equity; you only are putting more of it “up front.”
- Minimize the time to closing. You should respond quickly to any underwriter’s requests.
- Eliminate many, if not all, objections.
- Offer to pay some of the seller’s costs.
- Offer time for the seller to vacate the property without a rush. You may consider offering a lease back to the seller – a lease back at no cost to the seller is even better.
- Any other creative offers that will be attractive to the seller, and that will set your offer apart from others.
Remember, the seller has the option to select any offer that he wishes and does not need to explain why he selected that offer.
All of the above will give you the best chance to win the contract.