How do I buy a home in a competitive market?
Don't look now but we are back in a competitive real estate market. Here's how to put in a winning bid without overpaying.
High rents and low interest rates have pushed many home buyers off the fence so we are back to a seller's market, making it tough for buyers, especially first-timers. Hi, I'm Lambros Demos from Royal LePage and if you’re in the market for a new home, you may want to follow these tips to give yourself a leg-up on the competition and increase your chances of securing the home of your dreams, even in a hot market.
1. GET PRE-APPROVED FOR A MORTGAGE
Before you even begin looking at houses, get pre-approved for a mortgage. An experienced and competent agent will not work with you if you are not pre-approved. A seller's agent will not even look at your offer if you are not pre-approved. Save yourself time - and disappointment - by speaking to a mortgage professional today to get the ball rolling. Just pause this video and do it now! That's how important it is.
2. MAKE THEM AN OFFER THEY CAN'T REFUSE
Once you are pre-approved and found the home of your dreams, you are ready to submit an offer that even Don Corleone would have a hard time turning down. Keep in mind, there are four main items that sellers look at in an offer and I will speak to each of them: The four items are: Purchase price. Deposit. Closing date. And conditions. I will speak to each of these:
PUT IN YOUR BEST PRICE
One of the biggest mistakes home buyers make is they put too much emphasis on the asking price. The asking price is not an indication of value. It is simply an arbitrary number. In some cases, the asking price is not even the end point but the starting point for offers. I understand everybody wants a deal but sometimes, the asking price is low on purpose, to generate multiple bids. And if you're in competition, guess what? The seller will not bother negotiating with a low ball offer. They will just take the best one.
To determine the market value of the property, make sure your agent does due diligence and gives your his or her estimated market value. It may be under asking or over asking. This is another reason why you need a good buyer's agent, to make sure someone is looking out for your best interests, not the seller's. The listing agent is working for the seller, so his or her job is the get as much money for the seller as possible. Saving a few bucks off the asking price may sound like a good deal but in reality, you may still be overpaying. That is why you need your own agent to do the research.
MAKE A SIZEABLE DEPOSIT
Sellers are more likely to accept an offer with a larger deposit because that speaks to the
seriousness of the offer. 5% of the purchase price should be enough but anything less than 3% will likely raise flags for the seller.
BE FLEXIBLE WITH CLOSING
The closing date usually takes a back seat to the purchase price but in some cases, the sellers will require either a long closing or a short closing. The more flexible you can be with closing, the better your chances of acquiring the property, even if you don't have the highest bid.
SUBMIT AS CLEAN AN OFFER AS POSSIBLE
The fewer conditions you have in the offer, the better your chances, but don't do anything your are not comfortable with. If your pre-approval comes in much higher than the purchase price, and you have at least 20% down payment, I would not recommend dropping the financing condition. I would also not recommend dropping the home inspection condition, unless an inspection report was already done by the seller and provided to you. If you are happy with that inspection report, and you can comfortably remove that condition from your offer, it will go a long way. If your are buying condo, you will absolutely need a status certificate condition but other than these three, sellers do not want to see any other conditions. For example, making your offer conditional on selling your current home will likely not fly, especially if you are competing against other offers. This is why you need a good buyer's agent. To help guide you through the process and give you valuable insight.
3. WRITING A LETTER
Writing a letter to the sellers is a nice idea and may push your offer to the top but it will not replace any of the previous items I just talked about. Where it comes in handy is in a tie-breaking situations. Go ahead and write one anyway, it's better to pull out all the stops.
4. SHOW UP!
You've heard the expression, "Showing up is half the battle", well, in a real estate offer situation, this couldn't be any truer. Many agents will just e-mail the offer in but if you want to give yourself an edge, your agent should present the offer in person to the seller, with you waiting outside, just in case a signature is needed. That shows commitment to the offer and a willingness to get a deal done on the spot. It also gives your agent an opportunity to speak to the sellers face- to-face and convince them why they should choose YOUR offer over all the others.
Hope these buyer tips help. For more info, please don't hesitate to contact me, I'd love to hear from you. Have a fantastic day and good luck on your next offer!