Even though housing supply and demand has leveled off compared to the earlier part of this year, demand does still outweigh supply (the inventory of homes on the market). So it is critical to be as competitive as possible when you are up against other buyers putting a bid on the same home. It isn’t always about price, although that does tend to be the first thing most sellers look at. When a few different offers are close to each other, sellers will start looking at the smaller details within that offer. Here’s how you can try to prepare yourself:
- Get preapproved. I don’t just mean get “prequalified” or “credit-approved” where the loan agent pulls credit and takes an application. Get your loan and all documentation submitted to a lender, with the property listed as “To Be Determined” so that you have an official commitment letter. See my blog post here regarding getting preapproved and how it differs from a prequalification.
- Know your limit and what you can push. I often tell my clients that what a lender qualifies them for is usually much higher than what they will be comfortable paying on a monthly basis. Since you are the only one responsible for making that payment, you need to make sure you’re comfortable. However, sometimes it’s worth stretching your comfort level just a little bit to get into the home you want. Only you know your true finances and monthly payment responsibilities and lifestyle, so take a look at everything to make a calculated decision on what you can forego and will not forego for the right home.
- Short Close of Escrow period. Sellers are usually anxious to sell their home in an efficient manner and the shorter the close period, the more attractive your offer can be. This way, they can move on with their goals, and in the case of a vacant home, won’t be strapped to a debt for as long.
- Short or non-contingent offer. There are a few contingency period options you will review with your agent: property, appraisal and loan. By agreeing to remove these contingencies sooner rather than later, you may beat out other offers that are requesting longer contingency removal periods. Once you remove contingencies, and if you don’t close on the home, the seller can technically keep your Earnest Money Deposit. It’s important to be aggressive with your contingency removal dates, but not foolish. And whatever you do, discuss what you are offering with your lender, so they can assure you if they can meet that timeframe as well.
We are still in a multiple-offer market, so if your offer is in the running, you should encourage the listing agent to call your lender to confirm the strength of your financial profile. Also, I have had a few clients that won out bids because they appealed to the sellers’ emotional attachment to the home and wrote a letter to them. For a seller that would love to see their home being cherished by a family, this can go a long way too.
