If you’re buying or selling a house, the laws of supply and demand are sure to come into play. When supply outpaces demand, prices are low and buyers can be choosy. However, when inventory is tight and opportunities to make a purchase are limited, buyers need to be on the ball. If it seems like every house that catches your eye is sold before you have a chance to step over its threshold, you’ll need to follow these tips for a competitive housing market to put in a winning offer and secure the home that you want.
Tips for a Competitive Housing Market
Understand Your Market
The first step to navigating a competitive housing market is to recognize that you’re in one. If you aren’t sure, look for these five signs that you’re dealing with a competitive market:
- The inventory of homes for sale is low.
- Homes that are on the market are selling in days.
- Homes are drawing multiple offers.
- Cash offers are more common.
- Buyers are offering concessions and compromises.
When homes are selling like hotcakes, there’s no time to waste. Buyers need to be ready to move. That means knowing the differences between your needs and wants and identifying your deal breakers. It’s also vital to have your financial ducks in a row. How do you do that? Get preapproved by a lender for a home loan before you start shopping for a home. In a competitive housing market, many sellers won’t seriously consider an offer from a buyer who can’t demonstrate that they’re able to close the deal. As U.S. News & World Report explains, getting preapproved shows that you’ve got a solid grip on your financial situation. As an added bonus, getting preapproved before you start shopping ensures that you’re looking at properties that you can actually afford, so you don’t waste time and energy chasing after homes that are out of your price range.
Make Your Best Offer First
In a buyer’s market, it’s often suggested that you test the waters with your initial offer. When a housing market is hot, don’t bother. Make your best offer first. As PennyMac points out, sellers who are entertaining multiple offers rarely bother with counteroffers. They don’t have to! You probably won’t get a chance to sweeten your offer, so don’t hold back.
Think Beyond Price
Price is clearly a critical factor when making an offer in a competitive market. Don’t offer less than the asking price; in fact, you may need to offer more to catch the seller’s eye. Showing your preapproval letter is also necessary. However, savvy homebuyers think beyond price. The Balance recommends incorporating incentives like the following into your offer:
- Make a larger earnest money deposit to demonstrate your commitment.
- Offer to delay buyer possession to give the seller more flexibility in their move.
- Avoid asking for favors or small repairs.
A contingency is a clause in the sale contract that must be fulfilled before the sale goes through (source). For example, a contingent offer might hinge on a buyer selling their home or getting approved for a mortgage. In a tight market, including contingencies in your offer can sink it, so limit or eliminate them to make your bid more attractive.
Add a Human Touch
Buying a home can be an emotional experience. Selling one can be too. Adding a human touch to your offer by including a short, positive letter about why you want to buy the home can help personalize your offer (source). Although it’s often overlooked, this is one of the most important tips for a competitive housing market. In fact, it might be the deciding factor that convinces the seller to accept your offer over another.
At PrimeLending of Kansas City, we understand the value of a personal connection. That’s why our friendly, knowledgeable loan officers listen carefully to your needs and work with you to determine the best way to reach your goals. If you’re shopping for a home loan, contact us today.