Housing’s Hot: Here’s How to (Hopefully) Beat the Competition
There aren’t enough homes for sale to meet demand. So today’s buyers? They face some serious competitive headwinds.
Still, that doesn’t mean it’s impossible to buy a house. It just requires some work – not to mention a little patience.
Are you hoping to buy a home in today’s red-hot market? Here are five strategies that can help.
1. Offer an appraisal gap guarantee.
Low appraisals are a common problem right now. In fact, according to the National Association of Realtors, appraisal issues account for 15% of all terminated sales contracts and 26% of all closing delays.
Here’s why: Low supply and high demand have sent bidding wars through the roof (a whopping 65% of buyers find themselves in a bidding war). In order to win out, buyers are upping the ante, offering more and more cash to beat the competition. The only problem? Many times, the home isn’t actually worth that inflated price, and the appraisal eventually confirms that.
When the appraisal comes in low, buyers are forced to either: 1) make up the difference between their offer price and appraised value out of pocket, 2) renegotiate with the seller, or 3) back out of the deal entirely. Apparently, many are choosing the latter.
For this reason, you might want to consider adding an appraisal gap guarantee to your offer. This tells the seller that, should the appraisal come in low, you’ll cover the discrepancy out of pocket. It’s a great way to show them you’re serious about the home purchase and that you’re a safer bet than your competitors.
2. Be flexible about your terms.
It’s important to remember that sellers are usually buyers, too. That means they’re facing the same challenges as you, struggling with bidding wars, rising prices, and low inventory just the same.
If you want to stand out with a seller, be mindful of this when crafting your offer. What can you do to make the process easier for them, especially as they work to find their own home to purchase? One option is to be flexible about your closing date. You can also offer a lease-back – which allows the seller to rent back the home until they find a new property.
Both are good ways to add some flexibility to the transaction and make your offer more appealing to a struggling seller-turned-buyer.
3. Get ready to act fast.
Homes are selling at lightning speed these days. Last week, homes sold 23 days faster than the same week last year, so if you want to win out on that dream home? You need to be prepared to act fast – to schedule a tour, view the home, and put in an offer all within a day or two of it hitting the market.
Setting up listing alerts on various real estate platforms can help, and staying in close contact with your real estate agent is important, too. You should also be sure you’re on the same page as your agent well ahead of time – discuss your budget limitations, deal-breakers, and other important details, so they know exactly what you’re looking for as a buyer.
It’s also important to have an action plan for when a potential property hits the market. Is there somewhere you can drop off the kids last minute to attend a showing? Would your agent be willing to do a Zoom tour if you’re unavailable or at work? Finally, once you find a home you like, make sure to act fast. Put in an offer the same day if possible, and respond quickly to your agent’s requests. You want your bid to be one of the first on the table.
4. Put in a backup bid.
It’s disappointing when you lose out to another buyer, but remember: Deals do fall through. About 5% of all contracts were terminated last month, so while it’s rare, there is a chance the winning bid doesn’t actually work out.
Want to be next in line if that happens? Then put in a backup bid – and make it your best offer. If the contract is terminated for any reason, the seller will move to your offer next. (There still may be some negotiations at that point, but at least you’ll have a shot.) Talk to your agent if you’d like to be the backup offer on a home you lost out on; they can spearhead the process.
5. Try a cash offer (hint: You don’t actually need cash!)
Cash is king, as they say – especially in real estate. With a cash offer, there’s a much smaller chance of the deal falling through, and it also means a faster sale, too – both huge perks for a seller.
If you’re like most buyers, though, you don’t have hundreds of thousands of dollars on your hands, so what can you do?
Fortunately, there may be an alternative. A number of cash offer solutions have emerged in recent years, allowing buyers to put in a “cash offer” without the actual money in hand. The actual process for this approach varies, but essentially, the company offers cash on your behalf. You’ll then finance your purchase – meaning get a mortgage on the property – after the fact. Examples of cash offer solutions include Ribbon, Accept.inc, and HomeLight Cash Offer.
Keep in mind that not all buyers will qualify for these programs. Some are only available in certain markets, and others have strict financial and credit requirements. Still, it may be worth exploring, so ask your agent what options may be available in your area.
The bottom line
Today’s housing market is incredibly competitive, but that doesn’t mean buying your dream home is impossible. Be prepared, work closely with your agent, and find ways to sweeten the deal for sellers.
If all else fails, wait it out. Reports show demand is slowing, and with the fall fast approaching, the hottest homebuying season of the year may be abating. More favorable conditions could soon be on their way.