What's in this article?
How can a homebuyer make their offer stand out in a competitive market?
Every year, thousands of people engage in the exciting process of buying a house.
That’s a lot of competition, especially in today’s real estate market.
Any home you set your sights on in a seller’s market will likely have multiple potential buyers and perhaps a bidding war.
Few people can afford to make a cash offer or include a 40% down payment. If that’s the case for you, then there are several ways you can enable your offer to stand out from the rest.
It helps to have a detailed guide to buying homes in 2022. It also helps to have six of the best tips to get that offer noticed and accepted.
Read on about how Homefinity can help to get you in your new dream home.
If you take nothing else from this article, remember this one.
Even in a heated housing market, sellers can still only accept one offer at a time.
One of the easiest ways any seller can choose between offers is to see who has a preapproval letter from their mortgage lender.
Even if your offer is not the highest on the table, a preapproval letter can give sellers confidence that you have the ability to close the deal quickly.
The benefits of mortgage preapproval extends to you as well.
First, the process lets you know how much you are likely to qualify for right away.
The calculation considers all the expenses, like closing costs and interest rates, that you might overlook. Once you have your amount, you can focus on house hunting within your price range.
Second, preapproval can also help your offer strategy.
If you find a house below your preapproval maximum, you know how much you can bid above the asking price. This option is advantageous if you find a place you love and need to eliminate competitors.
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Your best home offer first
Borrowers have to face that bargains are hard to find in a seller’s market—and underbidding is not a good strategy.
Of course, you should never bid beyond what you can afford.
However, most houses in a heated real estate market will go above the list price—you need to be prepared for that situation and know what you can securely pay.
This situation emphasizes the importance of the preapproval process, as mentioned above.
At the very least, homebuyers should use a mortgage calculator (and know how to use it) to find their best offer.
Keep it simple
Many little details can make a home right for you.
Sometimes, those finer points about the house are of make-or-break importance to you.
For example, maybe the seller showed the house with a sofa that you find irresistible and want it included in the purchase price. Or maybe it’s an appliance or the tree swing in the yard.
When you negotiate for these little extras, you might cause yourself to lose the deal.
Homeowners are generally reluctant to get mired in negotiations for small details, especially ones the seller may want to keep.
Similarly, if there are things about the house that you think the seller should fix or change before you move in, that might sink your offer.
It’s a better plan to focus on the critical details like the significant structural aspects of the house. Is the roof in good condition? What about the foundation or the plumbing?
Keep in mind the essential details and forget the decor.
Home inspection or appraisal contingency
Two possible exceptions would be a home inspection contingency or appraisal contingency, as both could protect you from making a poor purchase.
- A home inspection done by a professional could reveal structural problems.
- An appraisal contingency is usually requested by your lender, who wants to make sure the home is being sold at fair market value.
These contingencies enable you to back out of the deal if something too negative comes back in the report.
You have the option of waiving them, which has the potential to give your offer price an edge over the others.
However, you might be stuck with the problem yourself if you discover something negative about the house after the closing date.
Earnest money is like a deposit—an option to sweeten your offer on a property.
An earnest money deposit is delivered when you sign the purchase agreement, frequently as part of the offer.
The buyer’s agent and the seller’s agent will work out a contract that defines how the earnest money would be refunded if the deal falls through.
An escalation clause
Sometimes called an “escalator,” an escalation clause is a section of a real estate contract that states you are willing to raise your home offer should the seller receive a higher competing offer.
An escalation clause offers protection to the buyer if other buyers outbid them. This clause clearly states that the buyer is willing to pay the highest offer, up to their spending limit.
First-time homebuyers: Use a real estate agent
Professional and experienced realtors are known for their negotiation and communication skills.
Homebuyers, and especially first-time homebuyers, will sometimes be tempted to attempt to purchase a home without a real estate agent to represent them.
Approaching a seller without an agent may look like you’re not serious about your offer.
Furthermore, if any details in the offer itself are vague or incorrect, the seller may likely not want to bother with the hassle of correcting it.
Choose an agent from the national association of realtors (NAR) and make sure you have professional advice and assistance on your side.
The bottom line
The best first step in the home purchase process is to get pre-approved for a mortgage from Homefinity.
Pre-approval puts you ahead of the competition, giving you that edge in a competitive market because it shows sellers you are truly serious about purchasing your new home.
Professional mortgage loan officers at Homefinity are ready to answer any of your questions and help you navigate your loan options.
Fill out a brief application to get a rate quote to get started. We look forward to hearing from you and helping you through the process.
Some references sourced within this article have not been prepared by Fairway and are distributed for educational purposes only. The information is not guaranteed to be accurate and may not entirely represent the opinions of Fairway.