You found your dream home, but there’s a competitive housing market. Two local experts offer five helpful tips to give you a leg up on other offers without over-spending.
You finally found your dream home and you’re ready to make it official. But, uh oh, it’s a competitive seller’s market and there may be some other offers on the table already. How do you make your offer stand out to get accepted without over-spending? Here are five helpful tips:
1) Have a good team. Your real estate agent and lender are your star players in making a home run offer. A good real estate agent will have a solid understanding of the market, be proactive, and communicate well. Your lender must be well-respected and locally well-connected. “Who you’re pre-approved with matters,” says Cincinnati-based Ron Erdmann, Branch Manager and SVP of Mortgage Lending at Guaranteed Rate. “Make sure they’re a lender who local realtors recommend, respect, trust, and know to have a great reputation. Realtors and sellers tend to lean toward local businesses they know and trust.”
2) Get pre-approved, not just pre-qualified. Unlike pre-qualification, pre-approval is a more specific estimate of what you could borrow from your lender. It requires documents such as your W2, recent pay stubs, bank statements and tax returns. The lender then uses those documents to determine exactly how much you can be pre-approved to borrow. “A pre-qualification vs pre-approval makes a world of difference. It means your lender has already verified your income sources, pulled credit report and verified your credit resources,” says Erdmann. “Sellers don’t want to sell to you if there’s any question about whether you can get a loan.”
3) Your down payment matters. According to the National Association of Realtors, in the past five years, more than 70% of non-cash, first-time home buyers — and 54% of all buyers — made down payments of less than the standard suggested 20% downpayment. That’s why Erdmann suggests having the ability – on paper – to make the larger 20% down payment, even if that’s not what you plan do in reality. “Having the ability to put down a larger downpayment is attractive, but that’s not necessarily what you have to put down,” Erdmann explains. “You can write a contract subject to putting down a larger downpayment, but that doesn’t mean you necessarily have to make a larger downpayment. It’s the ability to do so that counts.”
4) Consider non-contingency. A contingency is a clause included in an offer, which states that specific conditions must be met in order for a deal to close. If the conditions stipulated in the contingency are not met, the buyer is able to break the contract without facing financial repercussions. Therefore, contingencies are a means of providing buyers with protection against the risks involved in purchasing a home. One common contingency, according to Scott Oyler of Coldwell Banker Realty, is the buyer’s ability to sell their current home in order to purchase the new one. “Be able to to close quickly. If a house is vacant or if a seller has already moved on to buy their next house, they are more enticed to take an offer that will allow them to sell their house quickly and painlessly, even if the offer is slightly lower than the other offers,” he explains. “Try to write your offer non-contingent upon selling your current house if you currently own a house. Make sure you’re comfortable carrying two house payments if it comes to that. There are ways to access equity if you need it.”
5) Write a Love (Your Home) Letter. Want to win a seller’s heart — and home? A good, old-fashioned letter might do the trick. In competitive markets, it’s not uncommon for a house offer letter to be included in an offer on a house. “Some sellers really appreciate a personal note from the buyer as to why they want to buy the house. If you’re financially strong and you think it’ll help, you might as well. It adds that human element if the seller is open to it,” Oyler says. “It’s been a secret ingredient for many buyers, so it’s worth an ask. But always work with your realtor to craft the letter to not include any information that may be in violation of fair housing regulations.”
To learn more about Ron Erdmann, NMLS 728342, Branch Manager and SVP of Mortgage Lending at Guaranteed Rate, visit https://www.rate.com/loan-