It’s no secret that residential real estate is an extreme seller’s market. For sellers, this is excellent news, as many are netting hefty profits on their home sales. For buyers, however, the stress of multiple offer situations, higher prices, and intense bidding wars has become the new normal.
If homebuying is on your 2021 radar, it’s crucial to prepare for the reality of this market. And while you may have heard horror stories of bidding wars, don’t worry — it IS possible to win a multiple-offer situation and secure the house of your dreams! Here are 7 things to know when navigating these situations.
Come Out Strong
Even if a home isn’t currently in a multiple-offer situation, it can become one in a matter of hours. That’s why it’s important for buyers to always put their best offer on the table from the start. While buyers may hope the seller will negotiate a lower offer, that just isn’t the reality of the current real estate market. Sellers have the luxury of rejecting any offer that isn’t ideal.
Dan McQuillen of The Danberry Company Realtors in NW Ohio says “In this market we are telling the buyers that they better assume they only get one chance at getting the house.” But, what is a strong offer in this market? In a nutshell, meeting the seller’s list price or above, not asking for concessions, providing a quick close, and even requesting minimal to no repairs, could go a long way in winning intense bidding wars.
While cash is king in the real estate world, most homebuyers need to obtain a loan to purchase. Sellers want the reassurance that buyers have the capability of getting approved for a home loan. McQuillen adds that he frequently sees buyers make the mistake of “not being pre-approved with a reputable lender.” By working with a local lender who is confident in your loan approval, you can help reassure sellers that you’re a qualified buyer who can make it to the closing table.
Keep Requests To A Minimum
In a seller’s market, the seller is in the driver’s seat, leaving buyers at their mercy. Given the current status of the real estate market, sellers don’t need to provide concessions to buyers. Sellers in today’s market prioritize “clean” offers: no closing cost assistance, no contingencies, no additional warranties, etc. McQuillen sums it up: “Don’t nickel and dime the seller.”
If a buyer does need to request seller-paid closing costs on their behalf, McQuillen suggests “write a higher offer and find out what else is important to the seller. There may be things besides price that the seller would like.”
Be Prepared To Lose A Few Rounds
It’s not uncommon for homebuyers to go through multiple rounds of bidding wars on multiple homes before they finally get an offer accepted. This is what causes many buyers to become discouraged with the process. However, it is possible to buy a home in this market—you just need perseverance, a highly experienced real estate agent, and realistic expectations.
Get An Agent….Then Get Real
The single greatest asset in navigating an intense seller’s market is a dedicated advocate in your corner. A buyer’s agent is a representative who does much of the heavy lifting for buyers. Their experience and knowledge of the market can assist buyers in creating offers that provide the most appeal—from price, to closing date, and everything in between. Buyer’s agents are knee-deep in multiple offer situations every day, and many have the hard-earned experience to set their client’s offer apart from the crowd.
One of the greatest mistakes a buyer can make in a multiple offer situation is have lofty expectations. Expecting sellers to reduce the sale price, leave behind thousands of dollars worth of furniture or complete extensive repairs is simply not the reality of this real estate market. If you’re not entirely sure what the whole reality of the market is, it’s one more reason to work with an agent.
Several factors can help you navigate intense bidding wars, but there is one thing that could derail all those efforts: inflexibility. If you’re unwilling to look outside a geographic area, or rigid on your closing date, or refuse to negotiate on the terms of your offer—you will create a scenario that only brings more difficulty and frustration.
In all areas of the process, it’s important that buyers are flexible. That flexibility can help you stand out among a sea of offers.
McQuillen suggests “It could be that the seller would really like to sell the house and be able to rent back the house for a period of time,” so by offering a flexible close date, your offer could very well rise to the top of the list.
Know When To Fold Them
In this market, real estate agents are seeing buyers offer thousands of dollars over list price, waiving inspections, and even agreeing to pay over appraisal value out of desperation to win bidding wars. But, that desperation can be a recipe for buyer’s remorse.
As McQuillen explains, “The risk in waiving an inspection is there are some pretty significant issues with the house that the purchaser would be stuck with. The risk of waiving an appraisal is that the house doesn’t appraise and, worse yet, appraises for significantly less than the purchase price; then the purchaser has to come up with more money out of pocket than they were anticipating.”
If in the course of the bidding war the seller is expecting you to overextend yourself or open you up to greater risk, it’s okay to walk away from negotiations. It’s better to have rejected the deal than to sign up for a bad deal.
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