Monday, February 20, 2017
Home Buying in a Sellers Market
There are ways to improve your chances. Let’s focus on the ways you can present an offer to help make it more appealing. And remember, in a hot market, other buyers are your competitors.
Besides coming in with the top price, the best thing you can do to rise to the top of the offers pile is to eliminate as many contingencies as you possibly can. Do you need to sell your current house before buying? In a buyers market or even a balanced market, you may be able to make your offer contingent on the sale of your existing home. Not so much in a hot market. Why should they wait for you to sell your house before they sell theirs when they’ve got other buyers ?
The sale of a current home is only one of many contingencies that may be incorporated into a typical home purchase contract. Contingencies are possible deal-killers and the seller knows it. Each one is designed to protect the buyer. So how much protection are you willing to give up to boost your chance of getting the house?
You may be tempted to waive all contingencies, like inspection, appraisal and financing. That’s risky and you would be well advised not to. Instead, try to minimize the effect of the contingencies.
Shorten the compliance times instead. Rather than having home inspection completed in 14 days, offer to do it within 5 days. A seller is looking to get to closing as quickly and easily as possible. A buyer who is willing to move quickly in the process will appeal to a seller.
You can also change the terms of your inspection contingency. Instead of a traditional inspection contingency where you can come back and request repairs from the seller, you can buy the house “as-is” but with a due-diligence inspection. That means you have a specified number of days to conduct a detailed inspection of the home.
If you find minor things that would normally be negotiated with the seller, you just accept them. But if you discover something major, you can simply cancel the sale. The seller knows you aren’t going to nickel-and-dime them for every little thing or delay the sale for minor repairs.
Financing contingencies are another big hurdle. You are (or should be) pre-approved before making an offer, but you still want to include that contingency in case something happens to keep you from getting a loan. That’s one reason cash is king. A buyer who doesn’t need a loan to buy a home will rise to the top of the offer pile.
Most buyers don't have a lot of cash sitting around and need to secure a loan to buy a house. Providing a pre-approval letter and putting as much toward a down payment as you reasonably can helps to make an offer strong. A larger down payment indicates that you are in a strong financial position and less likely to have financing issues come up.
Appraisal contingency is slightly different from the financing waiver. This one says if the house doesn’t appraise for the sales price, you can renegotiate. If you’re getting a mortgage, your lender will insist that the house appraise for the contract price. If it doesn’t, you can either renegotiate price, pay the difference up front or walk away. But if you’ve waived the appraisal contingency, you’ll walk away without your earnest money.
real estate market.
Earnest money is the deposit you make with an offer. The point is to show that you’re serious and you’re willing to put some cash up to insure that you won’t back out of the deal for no reason without losing your earnest money. To a seller, a larger earnest money deposit signals that you are a serious buyer.
Call or contact me for more valuable tips on buying or selling in today's real estate market.