Since the housing market recovery has officially begun, demand for homes at record low rates has increased, and the supply for desirable homes is limited. As a home buyer this time of year, you can expect to have competition from multiple bidders. While the winner is usually the most qualified home buyer with the highest price, there are a few tricks to the trade that can increase your chances of winning against competing home buyers.
1. Highest offer
As stated above, the bidder with the highest offer is usually the winner. Before you make your bid, learn as much as possible about the local market and prices of comparable properties. You can ask your realtor to prepare a comparative market analysis (CMA). A CMA discloses the recent selling prices of similar properties. When market values are on the rise, as they are in certain cities, there is more guesswork involved in pricing. To be the successful bidder, you may have to pay more than yesterday’s comparable sales. However, the most important thing to remember in a multiple offer situation is matching what the seller desires.
2. Clean offer
Aside from the right price, sellers want offers with the least number of contingencies; conditions that must be fulfilled before the sale is completed. Common contingencies include financing, inspections, and sales of other homes. If you can shorten the contingency period, or waive it altogether, your offer will be more appealing to sellers. As you craft an irresistible package, be sure to take in to account any expensive, necessary repairs, like a cracked foundation or leaking roof.
3. Show your loan pre-approval and credibility
One way to stand out above the pack is to show your financial credibility. Submit a loan application to a lender before you make an offer. Once your credit is checked, the loan officer will write a letter stating that your mortgage is pre-approved. Attach a copy of the pre-approval letter to your offer. There are a number of benefits for getting pre-approved first.
4. Make a large down-payment
Sellers will be impressed when they see are large down-payment. If you can afford up to 10 or even 20 percent of the price, you’ll be much more competitive than those who can only put down 5 percent. If you can also show the source of your down-payment, like your bank statement or the sale from your previous home, you’ll gain more ground with the seller. Among other benefits, making a large down-payment has the added advantage of keeping the costs of your fifteen or thirty year mortgage lower than if you put less toward the down-payment. If you need to, you can always change your financial terms later, but a large down-payment can get you to the closing table.
5. Earnest money deposit
Another way to show your intention to buy is to put down an earnest money deposit. An earnest money deposit, which is part of the down-payment paid one to three days after agreeing on a price with the seller, tells the seller you’re serious about the offer. Putting as much of your down-payment as possible will impress the sellers.
6. Personal touch
Sellers are people just like you. If you go the extra mile, sellers can be swayed by a more intangible, emotional appeal. Some easy ways to add a personal touch to your offer is to include a photo and letter about you and your family, and why the house is perfect for you. Find out as much as you can about the sellers and try to meet them face-to-face, so you express how much you love their home. You can also request your real estate agent to hand deliver your offer. When sellers are looking at multiple bidders, you want to do something that makes you stand out.