Written By: Olivia Forgette
Virtually all real estate markets across the United States are facing a shortage of inventory, as of spring 2021. Homes are selling in bidding wars for above asking price, and essentially the buyer with the most attractive offer overall wins. This market climate can feel overwhelming and scary for buyers looking to find their new place to call home-sweet-home.
We hope that these tips to help make your offer stand-out as a buyer will aide in getting you under contract on your new dream property, and edge out the tough competition you are sure to face.
According to Forbes, it is clear that the housing market in the United States is over-heated. The number of buyers in the market is at an all time high, while inventory for properties is not meeting that demand. Days on the market can often be measured in hours, and home prices are up on average 15.8% year-over-year.
Another factor that is making the market over stimulated is that mortgage interest rates have continuously sat at record lows, as the stock market continues to boom. These low interest rates make the buying market even more tumultuous and competitive.
We spoke with Maureen Forgette, top-selling real estate agent with nearly a decade of experience in the field regarding the current market in her region.
“For buyers, at the moment, the market is a battlefield. Buyers must be ready to move, offer the highest price they can, and offer as many incentives [as possible] to the seller [in order to get the offer accepted],” said Forgette.
She continued, “[Buyers] think there is room to negotiate, but at this time, most sellers will toss your offer in the trash [if you try to negotiate or make requests].”
Tips to Edge Out Your Competition
Hire an Agent with Connections
A great start to getting your offer accepted as a buyer is to hire an agent with connections in the area you are looking to buy. With the market moving quickly, it is extremely important to work with an agent who is available, offers quick communication to both you and the seller’s agent, and someone who fully understands what it takes to get an offer accepted in this whirlwind of a market.
Your real estate agent should be the one guiding you in your offer to ensure that you remain competitive.
One of the most important tips to consider as a buyer, is to trust your agent and know that they are experts in the current market. Things are changing quickly and often scenarios are much different than the last time you made a home purchase. Trust your agent and listen to their guidance!
Forgette said when trying to find an agent as a buyer, she recommends asking one specific question. “Have you been successful in the last two months in getting your buyers under contract? If the answer is no, choose another agent,” she said as a sentiment of advice.
Make Your Offer Count
The fast-paced market often does not allow for a lot of negotiations, so be sure that your offer is one the seller will consider. Come in strong from the beginning with the price you offer, which often may be above the asking price for the property.
Knowing that most homes are selling for above asking price, it is crucial to remember to not look at homes listed at the top end of your budget. Looking at something priced at your max budget is often a waste of time because the home will likely sell for above asking and subsequently outside of your budget.
To avoid this situation, consider looking at homes that are listed for less than your maximum. This way you will know there is room for you to offer above asking within your personal budget.
Strengthen Your Terms
Along with ensuring your offer price is strong, it is essential to strengthen the rest of the terms of your offer. Consider including a higher down payment or placing an all-cash offer (if that is possible for you).
Other considerations to strengthen your offer terms include being flexible in your closing date expectations, and consider offering to purchase the home as-is without asking for repairs to be fixed.
Another popular tactic is to include appraisal gap coverage into your offer (meaning you as the buyer would cover the difference between the contract price and the appraised value if the home appraises for less than what the contract states). It is imperative you discuss appraisal gap coverage with your lender and real estate expert. Including appraisal gap coverage may lead to you needing more cash at the closing table, or may increase your mortgage payments overall.
The market for buyers is competitive, if you have not already realized that, so be sure when you place your offer to consider dropping the contingencies. A contingency is a part of your contract that states your offer is conditional based on XYZ happening. Common contingencies are things like, you must sell your current property before purchasing a new one, or contingencies related to inspection and appraisal. Removing these items ensures that the seller will not see your offer as an inconvenience, which can make a big impact in a multiple offer situation.
Consider dropping some contingencies if possible, and remember to speak with your attorney and real estate professional about the risks associated with this before deciding to move forward.
Think About Adding an Escalation Clause
An escalation clause can make buyers feel more secure in their offer when there are dozens of other offers flooding in. Basically, what an escalation clause means is that if another offer were to come in, you will increase your offer to a certain price to beat out the competition. There are risks involved with this, but it can be the small push you need to get under contract! Speak with your agent to discuss your unique situation regarding escalation clauses, and if adding one is a good idea for you.
Keep Your Requests at Bay
An overarching theme to getting your offer accepted is to not ask the seller for anything. Even if there is a to-die-for chandelier hanging in the entry way (that’s not included) or a beautiful antique piece of furniture you would love to keep in the space, do not ask to add it into your offer.
Sellers are looking for the most stress-free and easy scenario to sell their home, and with multiple offers likely, little extras like these that do not really matter should be left out of your offer.
Increase Your Earnest Money Deposit
Earnest money is money a buyer will put down to show they are serious about purchasing the property. Typically, this is about 1-to-3 percent of the sale price. In the crazy market we are facing today, consider putting your earnest money down closer to the 3% range or even higher. This will show the seller that you are serious about your offer and hopefully will help you edge out your competition.
Final Suggestions to Get You Under Contract
Forgette shared her expert advice by saying, “Be ready to move quickly. There is no time to ‘sleep on it’ [in the market today],” she continued, “Have your pre-approval ready to go and in the hands of your agent. [Be sure to] choose the right agent who understands the current market and has the tools to get you in the home of your dreams.”
It is safe to say that as a buyer, the market can feel overwhelming and scary at times. We hope that learning these tips to help get your offer accepted were helpful. Integrating even a handful of these tips can be enough to get you offer under contract. Remember to lean on your agent and their expertise!
If you are located in the Chicago or northern Illinois area and are looking for an experienced agent, contact Maureen Forgette with CENTURY 21 Roberts and Andrews.