Here are some tips on making a solid, competitive offer and avoiding common pitfalls to keep you ahead of the game.
There are a lot of things about 2020 that no one could have predicted. But the current boom in the housing industry, with its historic low rates, has definitely come as a pleasant surprise for buyers looking to purchase a home. With an increase in home purchases since March, we’re looking at a more competitive buyer market.
How do you make your offer stand out amongst the competition? Here are some tips on making a solid, competitive offer and avoiding common pitfalls to keep you ahead of the game.
1. BE OBJECTIVE
This is a weird time - an emotional time. We’re all facing challenges that impact us in different ways every day. Try to stay objective and focused on your goals as a prospective homebuyer. If you’re in the financial position to purchase a home right now, stick to your “needs/wants” list regarding your ideal home.
If you’re having a tough day or going through an emotional time, take a day to recoup and think about homebuying related matters with a clear head. Remember that your homebuying team (loan officer, real estate agent, etc.) is there to support you. Go to them with questions and concerns and let them help guide you through the process! Their support and expertise will help keep you on track from compromising on your must-haves and make the right financial decisions.
2. DOUBLE CHECK YOUR NUMBERS
Getting a pre-approval offer letter is a great way to show the seller that you’re serious and interested. However, it’s not a binding contract to how much you’re going to actually put down as an offer. The amount that you pre-qualified for is simply the maximum amount the lender is willing to loan to you (and what you’re capable of).
You might not actually want to offer your full pre-approval amount - you may lose negotiating room if the seller responds with a counteroffer. The amount you ultimately borrow should reflect your comfort level based on your financial situation. Read our blog post on essentials to good personal finance to make sure you’re financially prepared!
3. BE REALISTIC WITH YOUR OFFER PRICE
While you don’t want to sell yourself short, you also don’t want to pitch a low-ball offer. In a competitive market, the seller may not see you as a serious buyer. Work with your real estate agent to assess the home’s value and market prices in the area to come to a fair and realistic offer price.
4. DON’T BE AFRAID TO NEGOTIATE
After you submit an offer on a home, the seller can accept, reject, or come back with a counteroffer. Their counteroffer can include things like a higher price or an adjusted closing date. Now it’s time to put on your negotiating hat.
Work with your agent here to remain flexible but consider having a “dealbreaker” price that you won’t go above. Adjusting the closing date or accepting a slightly higher price can strengthen your offer and increase your chances of getting the bid. Ultimately, your agent is responsible for communicating with the seller’s agent, so don’t feel pressured or anxious during the negotiation process.
5. REMEMBER YOUR CONTINGENCIES
You should include contingencies with your offer on a home - conditions that must be met before the purchase is finalized to help avoid costly surprises down the road. For example, you may want to make your home purchase contingent on a home inspection and appraisal to ensure that the home in question is actually selling for what it’s worth.
Resist the urge to skip over the home appraisal contingency, especially if the home is being sold as is, meaning the seller isn’t responsible for repairs. You don’t want to get locked into a house that reveals hidden problems that will be too costly to fix.
Everyone’s homebuying journey is different, so it’s important to do your research, make a list of your “must haves”, and work with your team of home professionals to make sure you’re prepared and to have the best homebuying experience possible.