3 Things You Can Do to Make Your Offer Look More Attractive in a Competitive Real Estate Market
To say the current real estate market is a seller’s market, is an understatement. We can’t remember a time in recent history, when would-be homebuyers were rushing to make offers on newly listed homes, like they are today. The lack of inventory (i.e. homes for sale in the market) has created an environment where we are seeing the following trends with respect to offers:
- multiple offers within 24 hours of a home being listed (bidding wars)
- buyers offering 10-20% over the original asking price
- buyers willing to pay a portion or all of the seller’s closing costs
- an abundance of cash offers with little or no other contingencies
Historically low interest rates are helping to keep housing affordability reasonable for most, so what is a prospective homebuyer to do (short of paying cash and/or taking risks with non-contingent offers) to make their offer look attractive and be the one accepted by a seller?
Here are three things that may help you gain an edge over competing offers.
- Have Your Financial House in Order
While a cash offer may still be best in the eyes of a seller, a prequalified buyer is the next best thing. Be sure to go through a thorough financial review with your bank or mortgage lender to review your entire financial situation, not just looking at your credit. Be prepared to provide paystubs, tax returns and asset documentation upfront so the prequalification is as thorough as possible. Moreover, it is strongly recommended that you get prequalified for the maximum amount possible. As an example, you may be looking for a home in the $250,000 price range. When you make your offer to purchase the home, you may need to offer $250,000 with an escalation clause up to $275,000. Having the escalation clause allows you to quickly compete with other offers on the property. If it is truly your dream home and you decide you are going to go higher than the listing price, then you want to be prepared by making sure you are prequalified for the higher amount.
- Minimize Contingencies
Although some buyers are waiving appraisals in order to make their offer more attractive to the seller, this is an approach that is not recommended unless you are willing to pay cash for your home. In order to obtain a mortgage, your lender is likely to require an appraisal. The appraisal is put in place to protect all parties involved in the transaction by placing a fair marketplace value on the property. This ensures that the mortgage does not exceed the property’s worth and the seller and buyer both receive fair value for the home.
Another common contingency is if you have a home for sale. In a traditional buyer’s market, making an offer on a home, subject to the sale of your existing home, was commonly accepted by a seller under a term commonly referred to as the 48 Hour Clause. Today, many sellers will not accept this type of contingency. One solution to overcome this is to see if you qualify for an ENB Fast Move Loan. Certainly you must be comfortable and financially able to pay two mortgages at the same time until your existing home is sold, but this option allows you to advance equity out of your current home for down payment and closing costs on the new home and gives you up to 12 months to get your existing home sold, eliminating the need to make the offer on your dream home contingent on the sale of your existing home.
- Be Willing to Compromise / Use Your Imagination
Many homes that we see coming onto the market right now that aren’t under agreement within days usually have some type of “flaw” to them. Perhaps there are issues with major mechanicals or the home needs a complete makeover. This can be a daunting setback for a would-be homebuyer, but if you have a vision of what the home “could be” then there may be options to help you through the process.
Say you find a home that is in the perfect location and is everything you are looking for EXCEPT these type of issues, a renovation loan may be a way to purchase a home and convert it into the home of your dreams in a few easy steps. For a home that needs just some minor repairs, the ENB E-Z Renovation Loan can help you take that fixer-upper and put the finishing touches you are looking for. For a home that needs more extensive work, the ENB Construction Renovation Loan may be a better option.
Let ENB help you navigate the mortgage loan and home buying process. We offer free prequalifications and a variety of loan options to help make your dreams of homeownership a reality. Call a friendly ENB Mortgage Expert at (877) 773-6605 today!