How to set your offer apart in a seller’s market
This type of competitive market is exhausting for home buyers. Waiting to win a bidding war on a home takes patience. Maybe you have to move to a new city for work, or you need to upgrade to a larger home, making it necessary for you to buy when prices are higher.
If you find yourself in the situation of needing to purchase a house when inventory is low and prices are on the rise, otherwise known as a seller’s market, there are still ways you can set yourself up for success. Just getting your offer accepted in these market conditions can be challenging, with several buyers making offers, many of which are over the asking price.
Want to set your offer apart from the others? Try these tricks of the trade.
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Offer A Leaseback
A leaseback allows the seller to lease the property from the buyer after closing. Since some deals fall through before closing, it can be risky to move out of a primary residence before the transaction has been funded and completed. This method allows the seller to sell their home and then move out afterward, eliminating this risk. In addition, leasebacks offer security to the seller that they do not need to move until the deal is finalized.
Make sure your real estate agent writes all the terms clearly into the contract or provisional lease agreement. Leasebacks can be a nightmare if they’re not handled properly.
Make sure to check with your insurance company regarding a leaseback and the type of policy needed for proper coverage during the leaseback.
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Include An Appraisal Gap Clause
You will pay the difference between your offer and the house’s appraised value up to but not exceeding a certain amount. Appraisal gaps are among the most common strategies used by home buyers to get their offer accepted in a competitive real estate market. With the fast moving market, appraisers are just as overwhelmed and may find it harder to appraise homes at contract prices with prices increasing ever so fast.
When buyers offer an appraisal gap, they state that they have extra funds to fill in the gap between the appraised value and the contract price. They also waive their appraisal contingency. This perk gives the seller extra assurance that they won’t be in a situation to drop their home price. The buyer will need to provide these extra funds as a lender will not loan “extra” money to cover over appraised value.
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Offer More Earnest Money
Earnest money is offered with a sales contract to help the seller justify taking their house off the market. This will show the seller you are a serious buyer. Different states have different terms for earnest money deposits, but it’s typically between 1% to 2% of the sales price.
Contract contingencies allow the buyer to retrieve their earnest money if the deal falls apart for different reasons. These reasons may include home inspection issues or financing problems. In addition, earnest money disputes are a common issue in real estate.
If you offer more than the standard amount of earnest money requested, you are showing strong intent. You can also make your earnest money “go hard.” This term means that you will waive all contingencies to retrieve your earnest money if the deal does not close. This tactic shows serious intent to buy, pushing your offer above others that are less serious.
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Use An Experienced Realtor
If you end up stuck with a Realtor who is inexperienced with competitive offers, you may waste many months missing out on great homes. Instead, be sure to choose an agent who is closing transactions every month and knows the current market very well.
Some Realtors can even help you find homes that are not on the market yet. The agent you choose will have a direct effect on your success in buying a home. Don’t underestimate their influence and ability.
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