In Real Estate, we experience seasons that define market trends. The two most common are buyer’s market and seller’s market. When the available home inventory is high, buyers hold the leverage because they have options. Sellers will have to accommodate the buyer more if they want to keep them. A picky or difficult seller stands to remain in their property longer than they anticipated because buyers have their pick of the lot.
Sellers markets are marked by low home inventory and high buyer presence. In this case, the sellers hold the leverage. Buyers have limited choices when deciding on a home so they’re going to need to make their offer as attractive as possible. We recently had a seller receive 8 offers on their property after only 1 week on the market. Shocking but not surprising.
So as a buyer searching for a home in a seller’s market, how do you make your offer as attractive as possible?
If you’re committed to the property, then don’t mess around with the amount you’re offering. Come in strong and put your absolute highest and best offer forward. With a high volume of offers, the seller will not be willing to engage in the negotiation game.
Have your Real Estate agent communicate with the listing agent to inquire about the amount of offers already submitted
Place your offer at or as far above the asking price as you are realistically able to go.
Offer a High Deposit
When your agent asks what amount you would be willing to deposit in escrow, be willing to give a higher percentage than what is typically expected. A deposit of 3% of the purchase price is customary in normal transactions. If your intention is to secure the property, be willing to double or triple that amount.
Submit an escrow amount that is between 5-6% of the purchase price as opposed to the customary 3%.
A high deposit shows the seller you are serious and willing to put that money at risk because you are committed to completing the transaction.
Offer Favorable Terms
Contract dates and terms present another opportunity to build a more attractive offer. Unfortunately, a sellers market is not the place to make requests. Let’s say you really fell in love with the high-tech refrigerator you noticed during the showing but the seller has specified they’re taking it with them when they leave. Don’t fight them on it. They can have it! Being reasonable and agreeable makes your offer more appealing.
Where else can you optimize?
Dates: offer a shorter inspection and closing period. Ask your agent how soon you can close without being unrealistic. Cash offers close sooner than financed offers because they don’t have a loan approval process attached to them. On a cash offer, you can also bypass the home appraisal because you won’t be using a lender. Lenders typically require appraisals to assess whether the home is worth the amount they’re providing in the loan.
Other Terms: A seller may have a preference as to which title company they prefer to close with. Don’t fight them on it. If the title company is reputable and reasonable, agree to the sellers terms. Maybe the seller hasn’t had a chance to find a suitable new home. Offer to allow them to occupy the property for 30 days after you close. When they’re faced with offers that are similar in price, they’ll turn to the terms to inform their decision.
Our initial offer wasn’t accepted. Should we submit a backup offer?
Despite your best efforts, it’s possible your offer does not get accepted. Buyers will sometimes ask us if submitting a backup offer is a good idea. We typically don’t recommend it because we feel it diminishes your leverage when negotiating.
However, if the property has been receiving a lot of offers, it doesn’t hurt to submit a backup. Their current offer could lose traction along the process for any number of reasons. The buyer’s financing could fall through or they may decide to pull out during the inspection period if they’re unable to negotiate repairs with the seller. They may view the necessary repairs as overwhelming but you may view them as manageable.
At the end of the day, if you don’t end up with your dream property try to maintain your perspective. Markets change drastically and your next dream home may be right around the corner. Be patient and continue your search until you find something you’re happy with. Buyers in sellers markets tend to compromise because they have to. If you can wait a little longer, you may find a better home than what you were currently offering on.