Buying a home should be a fun and exciting time. To help avoid the frustration that may happen as a buyer in a seller’s market I put together my Top 5 Tips for Making Your Offer Stand Out in a Competitive Market. Hopefully these tips will give you the competitive advantage you need to get an accepted offer and allow you to finally buy your dream home.
Get Pre-Approved for a Mortgage
I cannot stress this enough. Although, the State of Wisconsin does not require pre-approvals to be attached with an Offer to Purchase, buyers should talk to a lender and get pre-approved for a mortgage prior to seriously looking at homes for a couple reasons. Here’s why:
- Pre-approvals provide you with what the maximum dollar amount a lender can borrow you. If you are only pre-approved up to $225,000, it wouldn’t be wise to look at houses that have an asking price that is much higher, such as $275,000. Why? Well if you are in a competitive market, it is likely a highly desirable house will go for at or over asking. If your pre-approval is only up to $225,000 you would be responsible for coming up with the difference of $50,000 (which cannot come in the form of another loan). My best recommendation: determine what you feel comfortable paying for a mortgage payment each month and see what that equates to as far as a purchase price. Try to stick around that price range and if that is lower than your pre-approval you always know you could offer a little more and have the confidence you could still get the loan in the end.
- Many sellers will take pre-approvals into consideration when determining whether or not to accept an offer, especially if they have received multiple offers. An offer with an attached pre-approval, gives the seller peace of mind, that if they chose to accept this offer (essentially, discontinuing marketing efforts to sell the home) that the sale will go through and they would not miss out on potential buyers.
In summary, just get the pre-approval before you decide to seriously look at homes. It may be the difference between the sellers accepting your offer or another buyer’s. Make sure it is yours!
Work with a Licensed REALTOR
It may seem biased that I recommend this, but working with a real estate agent really does have its advantages. A real estate agent who is established within the community you want to live in may have information about upcoming listings that are not yet available to other buyers, they will also be able to recommend properties you have overlooked for one reason or another. And most importantly, they can get you inside the house and help you write the offer.
Know Your Neighborhoods
Establish ahead of time where your desired neighborhoods are. Drive around areas you know have homes for sale, attend a few open houses, talk to neighbors if they are outside, get a feel for if that area is right for you. That way your real estate agent can establish a search in which you can get notified as soon as something in those neighborhoods become available on the market. Sometimes being one of the first people through the property can be your competitive advantage, take my home buying story for example. We were the second showing on the property and got an accepted offer before another 8 showings were scheduled the next day. We knew where we wanted to be, so when our home hit the market we got in the first day and wrote the offer immediately following.
Submit Your Highest and Best Offer
Although the days of the buyer’s market of 2008-2011 are long gone, some buyers still believe sellers will accept an offer significantly lower than asking. And while there are still some properties that allow for negotiation, something that has been on the market less than 1 week, probably won’t equate to an accepted offer if you submit a lowball offer in a competitive market. If you know you are going to be up against other buyers, my best recommendation is to submit your highest and best offer. The purchase price you feel is the highest you can justify, won’t put you over the edge of your comfortable spending range, and is fair. That way, if the sellers decide to go in a different direction at least you wont have second thoughts about if you should have offered more, etc.
Write a Letter
This last tip may not work for every house but in my case, and the case for a lot of the buyers I recommend this for, it does. Most homes have a lot of sentimental value to their owners. This being said, your competitive advantage may be a letter that allows the sellers to get to know you the buyers. Especially, if the sellers have lived in the home for many years, raised a family, or had an other memorable life event occur there, it will be more important that they know the person who lives there next will love it as much as they did. The sellers of my home had been in the house for 23 years prior to Daniel and I buying it. So when we knew we may be up against other offers, we wrote them a letter about our favorite features of their home, why we love the area, what it would mean to live there, and that we see ourselves spending a long time there. When the listing agent called to tell me that we had an accepted offer she stated, “I don’t know what that letter said, but they don’t want to work with any other buyers.” We said exactly what the sellers needed to hear in order to feel comfortable handing over the keys to someone else after all those years.
Hopefully with these 5 tips, you will have the competitive advantage you need to get an accepted offer in a competitive market. Best of luck all you home shoppers! If these tips worked for you let me know! I’d love to hear from you!
** Full disclosure, I am not a licensed mortgage lender or attorney. These tips are my own opinion based off my experience in the real estate market in the Greater Milwaukee Area. Although I hope these tips work for you, I cannot make any guarantees nor warranties following these tips will result in an accepted offer. **