Sales in February 2023 were up 14.5% month over month and still down 22.6% year over year according to the NAR Housing Snapshot. The median sales price dipped 0.2% to $363,000 and there are 2.6 months supply of homes on the market compared to 1.7 months a year ago.
“Inventory levels are still at historic lows, and consequently, multiple offers are returning on a good number of properties.” According to Lawrence Yun, Chief Economist for the National Association of REALTORS®.
It is still important to have a strategy for potentially competing with other buyers on the house you want to buy. The plan should include several available provisions and options, so that at the time of drafting the sales offer, you can consider exactly what to include based on the situation.
Unless a person is paying cash, you need to be pre-approved by a trusted mortgage professional long before you start looking at homes. Include the written pre-approval letter along with the offer. When you are making an offer on a home, have the mortgage professional available to reassure the listing agent by phone who will convey that to the seller.
If you’re concerned about multiple offers, make your best offer first because you may not get to counter and simply lose out to another buyer. Starting with a low offer and gradually coming up doesn’t work in highly competitive situations. In some cases, a low-ball offer could cast a pall on any consideration of your purchase contract altogether.
The listing agent will calculate the expenses on the different offers for the seller to show them what their net proceeds will be on each contract. Some types of financing have more costs incurred to the seller. Asking the seller to make repairs or other financial concessions could lower their net even though your offer may be higher.
From a buyer’s standpoint, contingencies provide options for things that may be uncertain like qualifying for a mortgage, discovery of major impediments to the condition of the home, and other things. To the seller, they are obstacles that may invalidate the contract causing the home back on the market. If the contingencies are necessary, try to make them as palatable to the seller as possible.
Instead of waiving your rights to make inspections, consider a very short inspection period to minimize the time the property is in limbo. Instead of asking for repairs, provide a simple “accept or reject” once the inspections have been made.
Try to accommodate the seller’s desired closing and possession dates. Sometimes an earlier date may be more desirable for a seller and other times, it might be a later date based on the home they’ll be moving into. Your agent can do some research and find a flexible alternative that may appeal to the seller.
Increase your earnest money deposit more than the minimum. It is a pecuniary indication that you are serious. Your agent can tell you what that amount should be and alternatives like increasing the earnest money after certain contingencies have been met.
Escalation clauses state that you are willing to increase your offer by a certain amount up to a specified maximum, subject to another bona fide offer being received before yours is accepted. Your agent will be able to further explain how these might work in your situation as well as share their experience with them in other similar negotiations.
You as a buyer and your offer to purchase need to be seen as the solution to the seller’s situation in price, terms, and reliability to close. Working with an experienced agent with seasoned negotiation skills is key to your success in buying a home in a competitive environment. Download our Buyers Guide.