Real Talk: Get your dream home in a seller’s market

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Real Talk: Get your dream home in a seller’s market
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By Danny Smith

In the current low inventory real estate market, competition is intense for desirable homes. Offering more than the asking price is an obvious way to make your offer more likely to be accepted, but here are some additional ways to make your offer more appealing once you find the home of your dreams.

Talk to the listing agent

An extremely important – and often neglected activity that – that your buyer agent can perform for you is talking to the listing agent to determine what’s most important to the seller besides price.

A contract involving hundreds of thousands of dollars or more is necessarily detailed, and there are options for addressing many of those details. Knowing what options are significant to the seller can help craft a contract that will be appealing.

Be quick

Be prepared to make an offer quickly. In this market, some sellers impose a near-term deadline for receipt of offers. Ask your agent to provide a sample contract so you are already familiar with its content and valuable time is not lost. A preapproval letter from your lender is essential in the current seller’s market.

Furthermore, selecting a reputable local lender and involving them in the offer process can help convince the seller of your financial strength.

Eliminate uncertainties

You should eliminate as many seller uncertainties as possible: The seller needs to assess the probability that the contract they accept is likely to be finalized.

The buyer can eliminate some of that uncertainty by waiving certain contingencies, or conditions that must be satisfied in order to finalize a home purchase. For example, lenders require an appraisal; you may offer to waive the appraisal contingency by agreeing to pay more, if necessary, than the value determined by the appraiser. Also, many sellers are unlikely to accept a contract contingent on sale of the buyer’s existing home.

Waive home inspection

You may offer to waive home inspection after contract ratification. One option is asking the seller to allow a pre-inspection prior to your making an offer. Another option is to include an inspection contingency “for information only.” You can then void the contract if you don’t like the results or accept fixing any problems after you purchase the property.

Include an escalation clause

Including an escalation clause in your contract is a way to overbid competing offers. The clause states the increment by which you will overbid a higher competing offer up to a specified limit. This provision as well as offering more than the asking price may yield a price exceeding the appraised value, so offering an appraisal gap guarantee to pay the difference is an important discriminator.

Payment options

An offer to pay cash rather than obtaining a mortgage is highly desirable and eliminates the need for a financing contingency, which is typically the most time-consuming element of a home purchase transaction. Of course, the offer should be accompanied by proof of available funds.

Seller closing costs – e.g., fees, document preparation, commissions and inspections – are typically on the order of 6% of the final sale price. Offering to pay some of those costs would certainly appeal to the seller.

Your earnest money deposit provides assurance to the seller that you will not attempt to withdraw your offer in contravention of contract provisions. The typical range for earnest money deposits is 1% to 3% of the offered price. A deposit near the upper end of the range is more appealing than a lower deposit.

Timing

In some cases, the date of final settlement is important. The seller may need extra time to finish vacating the property or to find a suitable next residence. The buyer could offer additional time through a rent back offer or, even better, continued rent-free seller occupancy. Conversely, the seller may want to obtain the proceeds of the sale quickly. Taking the seller’s timing needs into consideration can be a strong discriminator.

When you find a home that you simply cannot live without, ask your real estate agent about applying these suggestions to snag your dream home.

The writer is a real estate professional with TTR Sotheby’s International Realty in Alexandria.

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