Saturday, June 18, 2022 / by Teresa DiPeso
Once upon a time, prospective homebuyers could leisurely peruse a variety of properties in their price range, mull over their choices, put in an offer, and presume they’ll be moving in soon enough. But how things have changed!
In today’s hot seller’s market, scads of desperate house hunters scramble for limited inventory, paying sky-high prices to beat out other bidders.
As the homebuying landscape has evolved, so too must homebuyers, ferreting out a whole new set of insider ploys that can give them the edge in today’s market. To keep you up with the times, here are 7 great tips!
1. Look a little lower
Fixer-upper, anyone? How about an up-and-coming neighborhood? There’s no need to give up your wish list entirely; but in today’s market, you’ve got to get real.
Move-in ready homes with modern finishes sell first. So, you may need to look at the tier just below your maximum price. You could get a better deal and use the extra money to renovate, as well as skip the often long lines for turn-key homes.
This strategy also makes sense because often listing prices are intentionally low to build interest and encourage a bidding war. So if your top dollar is $350,000 and you look in that range, the available properties may well sell for $375,000 or higher. Check out homes in the $310,000 to $325,000 range, and you’re more likely to find something you can truly afford.
2. Enhance your earnest money
Cash offers may be king to the majority of sellers, but let’s face it: That’s not feasible for a majority of home shoppers. Still, you can make a financed deal more attractive with your earnest money, the 1% to 3% typically put down after an offer is accepted.
Buyers can get a leg up by putting down more earnest money and making a portion, if not all of it, guaranteed. Yes, this means the sellers get to keep that money if the deal falls apart for any reason at any time (which rarely happens). However, it makes a buyer look a lot more committed to doing whatever it takes.
Obviously, there’s some risk here. You don’t want to lose your hard-earned funds by going overboard on a deal that collapses. That said, if you have found a house that is The One, this tactic can give you the edge.
3. Obtain an approval letter
Yes, you got pre-approved for a mortgage—just like everyone else! In a seller’s market, go the extra mile. Different from traditional pre-approval, an approval letter, also known as a commitment letter, can be prepared by the lender once your loan application is approved. It typically states the type of loan, the amount, the terms, and the interest rate.
An approval letter lets the seller know that the lender has gone beyond pulling your credit.
This kind of document can give you a leg up because the home seller has less to worry about, such as your application going into underwriting and unraveling.
4. Add an escalation clause
An escalation clause, also known simply as an escalator, can help you be ultracompetitive as you vie for a home.
This contract addendum commits you to the price you are bidding while also agreeing to increase the amount should the seller receive a higher offer.
An escalator basically includes the original offer, the amount to be raised above competitive bids, and the maximum amount the buyer can offer.
Say you decide to offer the asking price of $200,000 for a home, but you can actually afford to shell out $10,000 more. Since bidding wars are fairly common these days, the escalation clause commits you to say that if other bids come in over yours, you’ll raise your offer to $210,000 if needed.
What’s good about this is it protects you from that crushing situation in which you lose a home by a margin you coulda, shoulda, woulda paid.
5. Throw in a lease-back
Here’s the conundrum: Sure, sellers hold loads of power when they are offering up their home. But once there’s an accepted offer, they are often thrown into the pool of desperate homebuyers and have to scramble like the rest of us to find a new abode. This is why some savvy buyers will sweeten their deal with a lease-back, meaning they will let the seller stay in place for a period of time for an affordable price, or for free.
If the seller is living in the property, the buyer can offer to lease it back for 60 to 90 days, at no charge, to allow them time to find their next place, for example.
Offering this option with your bid may appeal to a stressed “Where will we go?!” seller.
6. Know when to waive
In a less heated market, a home inspection is sacrosanct. It can be a buyer’s friend, telling you that a water heater is about to conk out or that there’s water damage that you never would have noticed. But lately, some buyers are skipping the home inspection. This may or may not be the right move for you.
Waiving inspections could be a way to win in a multiple-offer situation, but every case is different. For example, a house on city water and a city sewer system makes it easier to waive inspection, but I would never do so on a house with a septic system—there are far too many variables. Also, if the house was built in the last 20 years, it’s probably safer to skip the inspection, since the roof and most of the mechanical systems are within their typical life span.
7. Work With An Experienced Agent
I have been helping buyers secure their piece of the Shore life since 1995, with hundreds of sales and happy clients along the way! You need someone who has seen every kind of market and has the local expertise needed to get your offer accepted. I have lived in Cape May County for over 50 years and have the inside knowledge you need to compete in this market. Put my experience to work for you and let's get started today!