Unless you’ve been living under a rock for the past 18 months, you know that the housing market is bonkers. Prices are out of control, demand is out of control, and properties are selling faster and with more offers than before the pandemic began. If you’ve thought about buying a home recently, or tried, you have probably felt the crush of this competition.
Various measurements of growth suggest that the buying boom may be slowing a tiny bit, but it’s unlikely that it’ll be easy to buy a home at a reasonable price without getting into a bidding war anytime soon.
If you’re wanting to wade into this mess, there are a few ways to make your offer more competitive.
Offer more and pay in cash
Unfortunately, money talks in the housing market. If you meet or exceed the asking price and all other offers on the home, your offer will be competitive. Similarly, the more you can put up in cash versus financing, the more attractive your position, as the seller doesn’t have to worry about your financing falling through.
Another piece of financial leverage is an escalation clause. As John Gluch, owner at Gluch Group in Arizona, explains: “If someone offers more than the $600,000 you’re offering, you’re going to beat the next highest person by like $5,000. You do this, so you don’t get beat by $1,000.”
However, some real estate agents say that escalation clauses can be tricky for sellers to parse if there are multiple offers, so it’s best to simply put your best offer forward from the get-go.
Meet the seller’s terms
If your offer is lower but makes the seller’s life easier, you may win out over someone who is simply willing to spend more money. For example, agreeing to the seller’s desired closing date and allowing them to stay in the home a little bit longer until they are ready to move may be more valuable than extra cash.
“People don’t want the hassle, expense, or headache of moving twice,” says Amy Kite, owner at The Kite Team–Keller Williams Realty Infinity in Illinois. “Always have your agent ask what is most important to the seller.”
Purchase offers traditionally come with certain contingencies, which protect the buyer from getting caught in a bad deal. Common contingencies include home inspection, financing, appraisal, and home sale. All of these make it a little bit easier for the buyer to back out and harder for the seller to know for sure that the sale is final.
While foregoing contingencies can make your offer more competitive, remember that it also increases your risk. Don’t get so swept up in the process that you give up all of your leverage and put yourself in a difficult financial position.
Get pre-approved for your mortgage
Securing your financing ahead of your offer shows the seller you are serious and can speed up the process. At this point, this is a baseline for competitive offers rather than a way to stand out, says Chuck Vander Stelt, a real estate agent with Quadwalls.com in Indiana. Be prepared to demonstrate your financial ability to sellers in other ways, such as credit history, income and employment status, and funding for closing costs.
Be ready to make decisions quickly
This comes down to doing your research ahead of time so you can make big decisions — and smart decisions — in a short amount of time. Know what you can pay, what is important to you, and what the market is doing in the surrounding area so you don’t get caught in a bidding war that’s unreasonable or unaffordable. Similarly, have all of your paperwork ready to go and everyone on your team (agent, lender, attorney, etc.) in the loop.
You should also be prepared to move quickly once your offer is in, whether that’s scheduling inspections or being available to meet with agents.
Put together a creative offer
Jason Gelios, a realtor with Community Choice Realty in Michigan, says some buyers are winning with creative add-ons, such as paying for the seller’s moving truck or putting together spa weekends. Again, this comes down to knowing what matters to the seller.
“Home buyers should think outside the box and not just focus on the offer price,” he says.
Connect with the seller
Having a personal connection with the seller if you get to meet them may give you an advantage. However, this can get murky: While some real estate agents still recommend engaging in the longstanding tradition of writing “love letters” to sellers, others are moving away from this practice due to concerns about discrimination.
Even the National Association of Realtors has suggested that love letters may violate the Fair Housing Act. An alternative may be to have your agent communicate your interest and seriousness to the seller’s agent.
Finally, and this is important: While there are many ways to make your offer more competitive, don’t get out of your depth in a deal that costs you more than you can afford.