Getting your offer accepted in a sellers market
Buying a home in a seller’s market can feel near impossible. In a seller’s market there are fewer homes on the market than there are buyers.
The competition is steep and most buyers will do anything to get their dream home.
So how do you stand out and make sure your offer is accepted in a seller’s market?
Make a Large Earnest Money Deposit
The earnest money deposit (also known as EMD) tells the seller you’re a serious buyer.
When you put money into the earnest money deposit you are letting the escrow agent hold the funds until you fulfill the contract.
If you back out of the contract for any reason not included as a contingency, the seller can keep the funds as compensation for taking the home off the market.
A large EMD tells sellers you are serious and willing to put your money at risk. If you close on the house, the earnest money becomes a part of your down payment, or goes towards your closing costs, meaning less money out of pocket at the closing.
Skip the Contingencies
There’s a long list of contingencies you can add to your contract, but each one you add brings you closer to losing your dream home.
Some contingencies are a must, like an appraisal contingency. The appraisal contingency says you can back out of the contract if the home doesn’t appraise for at least as much as you offered. That’s a way to protect your investment.
However, in a seller market, buyers are removing their appraisal contingency to increase the chance of getting their offer accepted.
You should only consider waiving the appraisal contingency if you’ve talked with your real estate agent and feel strongly that you’ll need to waive it to get your offer accepted.
Other contingencies, though, can make a seller choose someone else. Financing contingencies, home sale contingencies, and inspection contingencies are all things that make sellers look for another offer because you’re asking for too many ways out.
In a sellers market, the sellers hold the power. They want to be able to sell their home with as little frustration and cost to them as possible.
Include an Escalation Clause
An escalation clause lets sellers know that you’re bidding $X but if someone comes in with a higher bid, you’re willing to increase your bid by a specific amount.
The wording of your escalation clause must be very specific and you should also make sure the price it will increase to is something you can afford in case the seller accepts it.
The escalation clause can help put an end to a bidding war.
The back and forth between the seller and multiple buyers can be exhausting.
Get Pre-Approved with a Large Down Payment
Sellers like buyers that have already been through the pre-approval process.
If you’re pre-approved with only a few outstanding conditions, you show sellers you’ll likely be able to close on the home loan.
You don’t need a specific type of financing, although it helps, but showing that you are a strong borrower with your large down payment already approved along with the rest of your financial conditions, you’ll have a stronger leg to stand on than other buyers who either haven’t been pre-approved or whose pre-approval comes with a lower down payment and many conditions that the buyer must clear first.
If you are using a government loan to finance your home purchase, you may have a harder time getting your offer accepted.
Consider switching your loan type to a conventional loan for a better chance of getting your offer accepted.
Have Money for an Appraisal Gap
In fast appreciating markets like we’re experiencing now, it’s common for the appraisal to come back at less than the accepted offer.
Some sellers might lower the contracted price and accept what it is, but not all will.
In this case, if you have the cash to invest in the home to make up the difference between the appraised value and contract price, you might win the bid.
You can put an appraisal gap in the contract (with your real estate agents help) to state that you’re willing to pay up to $X beyond the appraised value.
Only do this after doing your research though, knowing that the area is appreciating fast and that you aren’t investing more than you can afford.
Don’t Ask for Seller Concessions
The less you ask the seller for, the more likely they are to choose your bid.
If you ask the seller to pay your buyers closing costs, give you a credit at the closing, or to leave a lot of the non-permanent items in the house, you’ll force them to choose another offer.
Try to keep the offer as clean as possible, giving the seller a clean break and not making them feel as if they are paying you to buy the home.
Know what the Seller Needs and Offer It
No two sellers are selling their homes for the same reason.
Find out why the seller is moving and what they need to make it a seamless process. Do they need a fast closing date? Do they need to rent the property back from you for a month or two while their home is built?
Get as much information as you can so you can tailor your offer to their needs.
If they need to move fast and you already have your financing approved, you might be able to meet their demands.
If they need a place to live while their home is being built and you can wait to move into your new home, offer them the option to rent back from you.
The more you can cater to the seller, the more your offer will stand out to them.
Use an Experienced Real Estate Agent
You might think you’re saving money by not using a real estate agent, but buyers don’t pay the real estate commission fees and the right agent can help you tremendously.
Using an experienced agent means you’ll have the expertise and experience of someone that has handled seller’s markets before and knows how to make sure your offer stands above any others when you’re trying to buy your dream home.
Buying a home in a seller’s market takes a little more creativity and flexibility to get your offer accepted.
With multiple buyers in the market, offers are likely to be higher and buyers will go to any lengths to get their offer accepted.
Think outside the box, make your offer as clean as possible, and be willing to prove that you are a capable and serious buyer.
Sellers aren’t always looking for the highest offer, but instead, the offer that will make it as stress-free as possible for them.
More Information that may be of interest to you:
- Earnest Money on a VA Loan
- Types of Home Loans 2022 – What are your options?
- Don’t do these things before closing on your VA Loan
- Whats the best loan for a first time home buyer?
- VA Streamline Refinance
- Benefits of an FHA Loan
- Don’t have a Down Payment – Get a Gift – What are Gift Funds?
- Townhome vs. Condo – What is the difference?
- Steps to apply for FHA Construction Loan
- 3 Major Advantages of Buying vs. Renting a Home