Making an offer on a house can be one of the most stressful aspects of the home buying process. Even if you think you’re making a strong real estate purchase offer, another buyer can still end up outbidding you, especially if you’re trying to buy a home in a seller’s market.
A seller’s market describes an area where there are more people looking to buy homes than there are people who are selling their homes. In this type of environment, sellers are more likely to receive multiple bids, increasing the level of competition between buyers for a particular home. Fortunately, there are several strategies potential homebuyers can implement to boost their bargaining power when they’re making an offer on a house.
Pay With Cash
Not many homebuyers have enough cash to completely pay for their homes without the help of a mortgage loan. However, if you have enough cash to pay for a house outright, you’re likely to be one of the few – if not only – all cash bidders who are trying to purchase that particular house, which makes you a more attractive candidate for many homeowners.
Cash offers are more appealing than financed offers because a financed offer has the potential to fall through during the mortgage approval process. When a buyer comes to the table with cash, there are fewer stumbling blocks that could slow down or derail the closing process. Because there’s less risk involved, some sellers may even accept a cash offer that’s lower than competing financed offers.
If you aren’t able to pay cash for your home, getting pre-approved for your mortgage is another way to make your real estate purchase offer more appealing to home sellers. Being pre-approved for a mortgage means that a loan officer has reviewed your credit, income level and other qualifying information and has certified that you will be approved for specified loan amount.
Having a pre-approval letter shows sellers that if they accept your bid, there’s a stronger chance that your final loan application will be go through without any issues. Sellers usually have more confidence in pre-approved offers, giving you an edge over potential buyers who haven’t gone through the pre-approval process.
Make a Fair Bid
Many homebuyers are understandably interested in securing the best purchasing price for their new home. However, placing a lowball bid may not be the best strategy in a seller’s market. In a market that’s likely to bring multiple bidders to the table, you’ll have a higher chance of success if you place a bid that matches the asking price or exceeds the asking price. Your real estate agent can give you even more expert guidance on what the best bidding level is for your desired property.
Make an Offer with Fewer/No Contingencies
Almost every real estate purchase offer will include certain contingencies. Contingencies give you the option of nullifying the real estate contract under certain conditions, such as if the new house is appraised at a lower value than the purchase price. Some contingencies are fairly standard – such as specifying that the house has a satisfactory inspection report. However, additional contingencies may make a seller think twice about choosing your bid if he has other competing bids that don’t include as many contingencies. Carefully consider what contingencies are important to you, and only include the ones you think are absolutely necessary.
Making an offer on a house is a strategic process and your approach is even more important when you’re operating in a seller’s market. Talk to your Better Homes and Gardens real estate agent about which strategies will give you the very best chance at closing on the house of your dreams.