If you’ve reached the stage of putting an offer on a house, you’re looking for a place to call your own. The only problem? In today’s market, there’s a serious shortage of houses. With inventory sitting around all-time lows and buyer demand reaching new highs, encountering a multi-offer scenario is expected.
5 things to remember before putting an offer on a house
There’s still hope. Keep five considerations in mind so you can make your most competitive offer:
1. Crunch the numbers.
In a hot market, it’s essential to have a grasp on your budget and to know how much house you can afford to buy. This is the time to connect with a local loan officer and get prequalified, where you’ll learn exactly that.
Even better, use a loan program like Early Bird Approval to attain full loan approval before ever putting an offer on a house.*
Factors like income, assets, debt, credit history, and employment can all impact your mortgage approval. Getting these taken care of in advance through early loan approval can give you a crystal-clear picture of your homebuying budget. It can also give you the same status as a cash buyer in the eyes of a seller, increasing your odds of winning a bidding war should you encounter one.
2. Expect to act fast.
The current market is moving at a breakneck speed:
- The average house is sitting on the market for only 17 days, the latest REALTORS® Confidence Index from the National Association of REALTORS® (NAR) shows.
- Meaning, from beginning to end, a listing in today’s market is remaining active for about 2.5 weeks.
- Working with a skilled real estate agent will help ensure you access every limited opportunity as it becomes available.
Once you find the perfect home to suit your needs, your agent can help you quickly draft and make your most enticing offer. (If you haven’t found the right agent yet, reach out to your loan officer. They can refer you to a realtor they’ve successfully worked with in the past.)
“I recommend them to anyone, particularly first-time homebuyers.” Find a local loan officer and prequalify now.
3. Learn to lean on your realtor.
Buying a home may appear to be a whirlwind, but agents in your area do this on the daily. The agent you work with is there to share their expertise with you, giving you a critical advantage over the competition.
A seasoned agent can educate you on which strategies may be the most attractive to a seller, such as:
- Agreeing to a rent-back option to provide a seller with flexibility and extra time to clear out.
- Offering a quick close or putting in an offer that isn’t contingent on your current home’s sale.
Simple as it seems, speaking the language of a seller — and catering to what they need — may be enough to get your offer accepted.
4. Make an offer that’s strong but fair.
Who doesn’t love a good deal? Putting in an offer on a house at or near asking price may have worked well in the past, but the same can’t be said for today’s booming market.
Many have compared the atmosphere of the present market to an auction. In an auction, a seller typically sets a reserve price. This is the lowest they’re willing to go on the item for sale. Today, a home’s list price is seen as its reserve price, or its minimum. A seller isn’t likely to go any lower.
New Redfin data shows that:
“54 percent of homes [in May] sold above their list price, a record high, up from 26 percent a year ago.”
In a market with such high demand, both prices and emotions can escalate. Rely on your agent as your advisor to prepare an offer that’s competitive but reasonable, factoring in recent sales, market value, and local buyer activity.
5. Stay flexible in negotiations.
If you’re heeding tip number three, then you and your agent have prepared an offer that accounts for the seller’s desires and preferences. Even so, it’s probable that the seller will counter, presenting you with their own requests. Be ready to adjust and amend — for price, move-in date, and other contingencies (i.e., your conditions that the seller must agree to in order to finalize the purchase).
Still, there are some contingencies you shouldn’t waver on. Freddie Mac states:
“Resist the temptation to waive the inspection contingency. Especially in a hot market or if the home is being sold ‘as-is’, which means the seller won’t pay for repairs. Without an inspection contingency, you could be stuck with a contract on a house you can’t afford to fix.”
When you’ve found a home you love and are preparing to make an offer, it’s essential to not only consider your needs but the needs of the seller. Doing this, with guidance from your realtor and your loan officer, will help you to put in the kind of offer that a seller’s looking for.
Bring your strongest offer to the table
Want to stand out head and shoulders above the competition? Use our Early Bird Approval program to gain full loan approval and put down an offer that’s as good as cash. Ask your loan officer how you can quadruple your chances of beating out other buyers.***
*Contingent upon final approval of the property appraisal.
**“All-Cash Offers Quadruple a Homebuyer’s Chances of Winning a Bidding War.” Redfin, 2021.
For educational purposes only. Please contact your qualified professional for specific guidance.
Sources deemed reliable but not guaranteed.