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HOW TO BATTLE AND WIN IN A SELLER'S MARKET

“A seller’s market is when there are more homebuyers in a particular area looking to purchase a home than actual houses listed for sale,” says Redfin’s Lexi Klinkenberg. “A seller’s market usually results in rising home prices and stiffer competition among homebuyers. Also, home sellers will have the upper hand when it comes time to negotiate.”

Despite facing stiff competition, however, rest assured that you can still buy a house. You have to put a lot of thought into it, making sure your offer is one the seller can’t refuse (smart tactics only, no tough guy stuff, please).

Getting a loan pre-approval before making an offer is nothing new in the home buying game. It’s a necessity no matter what kind of market dictates your terms. If you don’t take care to complete this detail before offering, home sellers think you’re not serious about buying. An underwritten pre-approval for a mortgage usually takes about 24 hours and is strongly recommended for those looking to buy and want to be competitive in a seller’s market. Once you have this letter in hand, you’ll know how much house you can afford. Sharing it with a potential home seller shows them you aren’t wasting their time. An added note: once you receive your pre-approval, avoid using credit for big-ticket items. Credit score changes can negate your original approval.

This is not the time to draw the name of a real estate agent out of a hat. Ask around about the best agent “fit” for you, online or through friends. Having a seasoned, reputable real estate agent by your side throughout this process can help make everything go more smoothly and aid you in making an offer quickly when the time comes. “This is particularly true if you are moving to a new area or a larger housing market,” says Klinkenberg. “Your buyer’s agent can provide you with keen insights into specific neighborhoods, such as walkability, schools, and other local amenities. They will also help you when it comes time to make an offer, since they know what’s happening in the local markets and will use that knowledge to negotiate effectively on your behalf.”

With a pre-approval in hand and a home you are willing to buy, you’re ready to make an offer. The problem is, a lot of other people may be ready too. So how do you make your offer stand out? One way is to make an emotional appeal. “Letters to home sellers have become more and more common among homebuyers in a seller’s market and especially true with competitive neighborhoods,” she says. Tell a home seller why you want to buy their home. It’s not just a house. It may be the place where babies took their first steps, where they held holiday gatherings, or where they celebrated their kids’ graduations. But wait. There’s more. “Additionally, if you notice that you share something in common with the home sellers, mention it in your offer letter. If you both have kids or dogs, referencing this in your letter is a great way to make yourself more relatable, and will also show you wrote it specifically for them,” says Klinkenberg. Are you in love with the craftsman-style built-ins that have been so beautifully restored? Then say so.

While it’s not an option for many sellers, an all-cash offer is can make it more likely to “win” the house. Removing the financing contingency is a pretty attractive element of any offer. If that is not a possibility, however, consider upping your earnest money deposit. Your earnest money (also called a good faith deposit) is showing the seller how much skin you have in the game, which in turn tells them how serious you are. “Earnest money protects the home seller in case a homebuyer backs out of a home sale after the offer was accepted by the home seller,” says Klinkenberg. “Unless a homebuyer backs out due to something coming up in a home inspection or appraisal, the home seller will get to keep the earnest money. Earnest money can also be a great tactic to use if you’re shopping in a seller’s market or competitive neighborhood. Home sellers tend to favor buyers who put down a larger installment of earnest money because it shows that you are serious about your offer and giving you a leg up on the competition.”

If you are not familiar with the term “escalation clause,” this is the time to ask your agent about it. If an escalation clause is inserted into your purchase offer it means that if the seller receives another offer that is higher than your initial bid, you are willing to increase your offer to a higher price, usually a predetermined amount.

While your agent may advise against it (it’s sometimes their job to), you may want to submit an offer without certain contingencies as a way to stand out among competing offers. “Though it is still advised to keep the home inspection contingency, there are other contingencies you can certainly pass on,” says Klinkenberg, who says making your offer contingent on the sale of your current house is one of the worse bets you can make in a seller’s market. “Essentially, keep your contingencies to a minimum so the home seller has fewer hurdles to complete in selling their home.”

Other tactics help as well, such as having timeline flexibility to offer to the seller. “Something as simple as time might give your competitive offer the edge it needs to win the home,” she says, adding that you may have a better chance of closing the deal if you are willing to make compromises. “There may be some things that you are not willing to budge on such as a home inspection, but maybe you don’t ask the home seller to redo the back deck or paint the house before you move in. This will allow for a smoother closing process and for you to move into your new home more quickly.”

"Buy a Home", "First-Time Buyer"