Spring Market – Buyers Are Competing Again, How Can You Win?
It’s that time again… the spring real estate market has begun (back in February). I had a hunch it was going to be a very active spring, but I thought it would be a little calmer than last year. I was wrong. Buyer’s started coming out of the woodwork in February, even among the -30 wind chills. We’ve been receiving multiple offers on listings within days of them hitting the market. We’ve been competing against many other buyers when writing offers for buyer clients. One house had 14 offers, and another we lost the competition even though the buyer was willing to go $20,000 above asking price. It’s craziness out there.
It definitely continues to be a Seller’s market. If you are considering selling, now is a great time to list! Let us help you with a great listing strategy that brings you top dollar in the current market. We can help you navigate and negotiate the multiple offers.
If you are thinking about buying, it could be a challenge, especially in the lower price ranges. Although, understanding the market and how to gain an advantage with your offer will help you beat the competition. Aside from the obvious thing, price, there are many things you can do to make your offer look better. Here are some tips:
1) Minimize your contingencies. The more contingencies you have, the more ways you have to get out of the contract, every additional contingency is a negative in the seller’s eyes.
- Radon Testing – This is something that has been more common in recent years. In a competitive situation, its probably worth avoiding it. If a home tests high for radon, it can usually be solved for $1000 or less. You don’t want to loose a deal over $1000.
- Home Inspections – I don’t recommend not having an inspection, because every home has it’s issues somewhere. Although, if you are willing to forego that is a definite positive in the sellers eyes. Another option is to allow a forgiveness allowance, for example you say I’ll ignore up to $5,000 worth of inspection defects. This says to the seller, I’m not going to nit-pick the little items, I’m just protecting myself for something major that we aren’t seeing.
- Appraisals – When there is a bidding war, it’s pretty easy for a home to sell for above what an appraiser thinks it’s worth. If you really want the house, it might be worth skipping the appraisal contingency. Or similar to the inspection, you could give allowance of an amount you are willing for the property to under-appraise.
- Home Sale Contingency – Let’s be real, this rarely flies when you are competing against buyers without a home sale contingency. It has worked for us a few times on higher price range homes $400,000+, where most buyers are moving up from another home. However, if you are purchasing in the Madison area market for under $350,000, chances are slim this contingency will get approved. If you attempt to use this contingency, you’d better have your home already under contract with a buyer in order for the seller to give it consideration. Alternatives to selling your home first are bridge loans or home equity lines of credit. This allows you to use some of the equity in your current home to help with the down payment on your new home. This can be risky, because you’ll end up with two mortgages for awhile. Although, if you have a good agent who can tell you fairly accurately how fast your home will sell and for what price, you can minimize your risk.
2) Have strong financing. A buyer who is putting 20% down with conventional financing provides much more confidence to a seller than someone attempting to do a low down payment specialty program. Better yet, a buyer willing to pay cash instills a lot more confidence in the seller. A couple strategies we’ve seen are buyers using a parent’s money as financial backing to offer without a finance contingency, but then the buyer gets financing anyway. Or a buyer could use investment funds to prove they have cash available if financing falls thru, and then offer without the financing contingency.
3) Don’t ask for extras. Asking for something as minor as a home warranty affects the seller’s bottom line and could make you lose to the competition (you can always buy your own warranty later). Or sometimes the seller wants to take their washer and dryer with them, don’t ask for it if they do. Again, when you are in a competing offer situation, you’d hate to not get the house over $500.
4) Adapt to the sellers timeline. Ask the seller when they want to move and try to align with their date. Also, keep contingency timelines as short as possible.
5) Put down more earnest money. It doesn’t actually cost you more because it’s credited toward your bottom line at closing, but more earnest money shows more seriousness and confidence in your offer.
Believe it or not, price isn’t the only thing a seller looks at, figure out what is ideal in a seller’s eyes, and improve your terms to help win the deal.