Do you want to know how to make the best offer on a house? In today’s market, there are many moving parts that could make or break your purchase offer. Price matters, but it’s not the only factor sellers consider when choosing which offer to accept.
State of the Market
To compete in any financial marketplace, you first have to know the basics. Here’s a snapshot of the 2021 real estate market.
According to the National Association of Realtors Summary of July 2021 Existing Home Sales Statistics, the median home price has increased by approximately $50,000 over the past 12 months. This gain of nearly 18% is likely due to an inventory supply shortage affecting markets across the United States. Even though supply is low, first-time homebuyers are still inking deals. The NAR reported that first-timers accounted for 30% of the buyer pool in July of 2021. Demand for housing remains high.
It is also notable that homes are staying on the market for an average of just 17 days according to the aforementioned report. However, real estate agents and their clients are reporting anecdotally that it is not unusual for a home to receive multiple offers within 24 hours of being listed for sale. How’s that for a competitive market!
For a detailed forecast of the global real estate marketplace, check out this video from NAR on Youtube.
These statistics can and will change every month. Buyers should find an experienced Realtor to guide them through market fluctuations. Your Realtor should be committed to acting as your fiduciary and keeping you informed on changes in your market’s statistics and trends.
House Hunting in a Seller’s Market
The scarcity of inventory this year has resulted in a seller-favored real estate market across the country. What does this mean if you’re a buyer? You can still find the right home but you need to be prepared. Buyers should be pre-approved and ready to make an offer within 24 hours or less of finding the home they want. For more on the pre-approval process, check out The Porch Archive.
Also, brace yourself for disappointment. You may not get the first house you offer to purchase. You will likely have competition because well-marketed homes are receiving multiple offers. Hang in there and keep trying!
Strategies for Writing the Winning Offer
Time is of the essence, especially in a competitive, low-inventory market. Get preapproved ASAP and keep your approval documents up to date with your lender. If you find the perfect property, it is important to make an offer as quickly as you are willing and able to do. Sellers tend to favor offers that allow them to proceed to the closing table in the shortest amount of time (all other conditions held constant). As stated above, agents and their clients in many markets are experiencing multiple-offer situations within a day or two of desirable listings hitting the market. A delay due to paperwork or credit issues could impede your chance to compete. The seller(s) are likely to accept an offer quickly when presented with multiples, especially in tight markets where buyers are presenting their highest and best right out of the gate.
Discuss contingencies with your Realtor. Generally, the less contingencies you put on a purchase offer, the more attractive that offer will be to a seller. Common contingencies include the sale of an existing home, the right to cancel after an inspection, and a lower limit on the appraised value of the collateral (i.e. the subject property). The take-away is this: Could your Realtor still put together a good deal for you without these contingencies being attached to your offer?
How To Get Your Offer Noticed
It is not uncommon for sellers to receive twelve or more offers in today’s market. (Yes, twelve!) Buyers should be prepared to write their best offer upfront. Some strategies buyers have employed in recent months include
- working with a Realtor who is known and respected
- staying in frequent (constant!) communication with their Realtor and loan officer
- including proof of loan pre-approval with their offer
- offering cash or a large down payment
- remaining available for showings seven days a week
- viewing homes via FaceTime or some other app from a remote location if necessary to get their offer in on day one…This strategy requires excellent communication and trust between a home buyer and their Realtor.
What Not To Do
One recent trend in 2021 is the “buyer love letter,” whereby a buyer includes a compelling statement with photos. Buyer love letters might catch the attention of some selling agents and their clients, but this strategy is NOT RECOMMENDED by the NAR. Buyer love letters, even when written with the best of intentions, could inadvertently lead to fair housing issues and therefore should not be included with your purchase offer.
Another trap to avoid is focusing on cosmetic details. Do not let the décor of a home deter your interest. Paint, wallpaper, drapes and even “permanent” fixtures can be changed. This added expense should be taken into consideration but should not be a deal-breaker in a seller’s market. Unattractive design choices, if well-built and functional, can be replaced later when your time and budget allow.
Your Realtor is Your Best Resource
Experienced Realtors get the job done. Buyers should work with an agent they trust, before viewing homes and certainly before making an offer. A good agent is your best resource and knows the local market better than any online search engine.
With over 3 million agents brokering real estate in America today, how do you choose the right one? An agent with ten or more years of experience has likely represented buyers in a seller’s market before. Look for a seasoned agent with a productive history of working well with other agents. Online reviews can be helpful, and so can recommendations from friends and family. The best agents don’t always advertise – they work by referral.
The best Realtor for you will know your market well and will prepare in advance for showings. Your agent should be ready to make an offer quickly in today’s low-inventory marketplace. Work with a buyer’s agent who shows up prepared, informed, and ready to negotiate for you. And remember: the best offer on a house is still the one that benefits both buyer and seller, even in a seller’s market.