"How do I make a winning offer on a house?" We hear that often with today's seller's market. If you've been making offers to no avail, then it's time to stop the heartbreak and ensure a victory. Our highly experienced real estate Sales Director, Kathy Phillips, offers these helpful tips and strategies for winning a bidding war on the house of your dreams.
Work with a knowledgeable realtor
First and foremost, ensure that your realtor truly knows the local area and the values of the homes within it. That's especially true for any specific communities that interest you. A professional, seasoned, highly knowledgeable agent will have the answers to all of your questions and offer tons of helpful advice. But, most importantly, they'll know how to write a compelling offer and effectively negotiate a winning bid on your behalf.
Know that "cash is king"
It's no secret that sellers like cash buyers. So if you're purchasing with cash, make sure you can provide proof of available funds. A letter from your bank or a copy of a bank statement (with account numbers blackened out) helps improve your odds tremendously.
Use a loan to your advantage
Not using much cash? That's ok. If you're obtaining a loan, keep these tips in mind:
- Be sure to get prequalified ASAP, so there are no surprises.
- Sellers like to see pre-qualification letters from known lenders.
- Shoot for a 20% down payment – but the bigger the down payment, the better.
There are several contingencies that could hurt your odds. We'll touch on each with advice on how to best deal with each one.
Sale of your existing home - Avoid using the sale of your current property as a contingency. Try these tactics instead:
- Prequalify for a loan without the sale of your home.
- Obtain a bridge loan to buy a new home.
- Wait to buy your new home until you've sold your current home.
Financing Contingency - If you're confident you can obtain a loan for the home's purchase price, remove the financing contingencies from your offer. However, keep in mind that you'll still need to provide a loan pre-qualification letter from a known lender.
Appraisal Contingency- A seasoned realtor who's knowledgeable about the area will know the value of the property you're interested in, giving you the confidence to eliminate any appraisal contingencies. But know that if you're obtaining a loan and the home doesn't appraise for the purchase price, you must pay the difference in cash. It's a risk, so be sure of the potential appraised value of the property before eliminating this contingency.
Inspection Contingencies - It's rarely advised that you purchase a home "as-is" with no inspection. That is unless you're an experienced investor who's buying it as an investment property. Those buyers usually flip or earn income from the home. But for everyone else, it's a good idea to have an inspector ready to go. That way, you can get the home inspected quickly (after the contract is binding) and limit the number of days for your due diligence for inspection and negotiating repairs. Considering that today's sellers are making a significant profit on their homes, they're usually willing to negotiate repairs or give a credit for the cost of those repairs.
Ditch the love letters
Contrary to popular belief, we advise that you avoid writing "love letters" to the seller. These are typically heartfelt notes included with your offer explaining why you want the home so badly. Letters like these are unwise because they:
- Limit your negotiation power
- Make sellers feel uncomfortable
- Can open up legal liabilities, especially as they relate to fair housing laws
It's better to treat the home purchase as a business transaction that stands on its own merits.
Dealing with multiple offer bidding
Some multiple offer situations generate offers with "elevation clauses." An elevation clause creates a stipulation that you're willing to pay a certain amount of money over the highest bid, but only up to a certain amount. Also, the seller must provide evidence of the highest offer to the winning bidder. On some occasions, this may be an effective strategy. However, many sellers prefer to avoid those scenarios and work with the most qualified, strongest original offer instead. Again, an experienced realtor is beneficial in these situations and can provide excellent advice on proceeding and winning the bid on your dream home.
There are instances in which negotiations are ineffective, most often when they relate to new construction. Today, builders have very tight margins due to the impacts on supply chains. Therefore, new construction is more non-negotiable than ever. So for those interested in a brand new home, be prepared to pay full price and closing costs. It's not a bad deal because the extra money spent on a new home avoids the expensive maintenance and updates needed on an older home.
Whether the home you desire is new or a resale, be prepared to decide on a listing quickly. Even if you don't like any properties currently on the market, ensure that your real estate professional keeps you updated on any new opportunities. At the very least, your agent should let you know about any new listings and upcoming new construction homes that are not yet listed. Then, when the right house comes along, you'll be ready to make a compelling offer before anyone else.
Stop waiting to buy
With home prices being so high right now, we know it's stressful. But remember, you're likely going to sell your existing home for a higher amount too. So, if you're waiting for a price drop, that means the sale of your current home will also bring in less money. Considering that interest rates are still low and the market is still strong, there's really no reason to wait.
Do you feel like you need more helpful real estate advice? We can help – especially if you're looking for a house in the Lake Oconee area. Our Director of Sales, Kathy Phillips, would love to help you find the home of your dreams. See our current real estate opportunities at Harbor Club, and feel free to contact us with any questions or schedule a tour. Cheers to a new year and the new perfect home for you.