In mid-March, when COVID-19 lockdowns began, experts predicted a severe contraction in real estate markets, with job losses and logistical challenges creating buyer uncertainty and economic instability. To the surprise of analysts and individual real estate agents alike, demand continued to be strong in markets all over the country. At the same time, lenders, brokers, and closing officers became more adept at managing transactions virtually, opening the door for socially distanced home sales even in the midst of the pandemic.
With no shortage of demand, the challenge then became finding enough new listings to satisfy the still-hot market. Aided by record-low interest rates and enthusiastic buyers, each house that hit the market became the subject of multiple offers, going under contract within just hours in some cases. How, then, can buyers work with their agents to create offers that win out over all the others? Is it just a numbers game, with the highest purchase price winning?
Below are some of the best strategies to help you make your offer more attractive to sellers and their agents. In addition, there are also some alternative scenarios to help you expand your sights, raise your odds, and create a more successful purchase process.
Maximize Your Offer
Of course, it goes without saying that when you are competing against a number of other buyers, you’ll need to come to sellers with your best possible offer. However, a good offer is about more than meeting or exceeding the asking price. In many cases, it’s the other elements of the offer that serve as the determining factor and help you win out against competitive buyers.
Include a Pre-Approval Letter
In order to ensure that the homeowner can feel secure in selling to you, submit a pre-approval letter along with your offer. Talk to your lender at the beginning of your home search and provide the documentation he or she needs in order to provide preliminary approval for your loan. This reassures the seller that you have sufficient financial resources to see the purchase all the way through to closing—and that they’re not going to find their home put back on the market.
Include an Introductory Letter
In some cases, sellers are choosing among a number of similar offers, so an introductory letter can help you stand out. Let the homeowner know what you love about the house and the neighborhood, and why you’re so excited to move there. Making an emotional connection can raise your odds of being the seller’s first choice.
Be flexible on Closing
While you may not be able to outbid the competition every time, you can compete in a number of other ways. One of these is the closing, which you can schedule at the sellers’ convenience. By making the closing as easy as possible for the seller and scheduling it on their timeline you provide an incentive for them to work with you on the home sale.
Minimize Your Contingencies
Contingencies are designed to protect you during the contract period, but this may be a good time to minimize the number of contingencies you attach to your offer. While you will probably want to ask for a home inspection, you may choose to ask for an information-only home inspection so that the sellers can avoid a protracted negotiation over repairs.
If you have a home to sell before you buy, you may want to explore a bridge loan in order to allow you to close on the new house without waiting to close on your current house. Talk to your lender about your options, and talk to your real estate agent about coordinating the timing of both the sale and purchase.
Consider Alternatives in a Low Inventory Market
One way to circumvent the challenges presented by a low inventory market is to broaden your vision of what constitutes an ideal home. Consider the following alternatives:
While you may have a neighborhood in mind for your home search, it might be time to think through other desirable neighborhoods in your area. Rather than trying to buy in the most popular market, consider those that are on the upswing but not yet fully developed. In addition, you may want to consider new construction neighborhoods in order to ensure that you can find exactly what you’re looking for.
You no doubt have an extensive wish list in place for your home search, but it may be time to consider changing some of your requirements. For example, if you’re looking for a perfectly polished property where every upgrade has already been done for you, it may be worth choosing to opt for a less than perfect home, then adding additional spaces or making improvements after you move in.
You may want to go all the way and purchase a home that is being sold as-is, like a fixer-upper that will allow you to add your own personal touch in the months ahead. While this type of home can be a challenge, it gives you the opportunity to save money on the purchase and create a home that’s exactly what you’re looking for. At the same time, you’ll add value with every repair and improvement you make, increasing the investment value of your purchase more quickly.
Whatever you decide, the most important thing you’ll need to do is keep the lines of communication open with your real estate agent. Be open to his or her guidance regarding neighborhoods, homes, and professionals who can help you navigate the current challenging market successfully.