Are you ready to buy in this hot housing market? Purchasing a home in the type of market like we are experiencing in Columbus and the surrounding areas this year can be tough. A great economy means more and more residents are moving in and the number of homes on the market can’t keep up. Get ready to buy with these five tips, and you will be prepared to move quickly and win out even if there is a bidding war!
You wouldn’t go to the grocery store without your wallet and without knowing how much money you have to spend. Shopping for a home works the same way in a tight real estate market. Get pre-approved for your loan and have your lender prepare a pre-approval letter. Many sellers will not even show their house to buyers who are not pre-approved. If you can, bring cash to the table. Cash is appealing to a seller because it indicates that you are ready with both a down payment and to cover any gaps if the appraisal comes back low.
If you are quick enough to be the first buyer to make an offer, the seller will see you as a serious buyer and the sale of their home a reality. This is not the time to make a low-ball offer. Trust your agent about the offer to go in at. When there is a lack of listings and a ton of buyers, sellers will not bother countering a low-ball offer. They will just move on to the next buyer.
INCLUDE AN ESCALATION CLAUSE
Only the market can dictate what buyers are willing to pay for a house. If you are confident with your offer based on your research and comps and then get outbid, it can be very frustrating. An escalation clause allows you to keep bidding automatically as other offers come in. The escalation clause is an amount of money a buyer agrees to increase his/her offer to, if there are other bids and is possibly the single best tool you can utilize in a bidding war!
Let’s say the purchase price of the home is $300,000, but you expect it could go as high as $350,000. By putting an escalation clause into your offer, you are saying you are willing to go as high as $355,000 for example. Make sure, however, that the clause also identifies how much over the top bid you are willing to pay. In other words, if your competitors only go as high as $330,000 in the example above, the seller can’t expect you to pay $355,000. Instead, if you have indicated you would pay $1000 over the top bid, (under your initial level of course) then in the example, when your competitors highest bid is $330,000, you would end up winning the bidding war and paying $331,000.
Buying a home, especially in a hot market, can be very emotional. You have to make quick decisions about a purchase you may keep for 30 years. It is natural to get caught up in the moment when there is a bidding war and overpay for your “dream home”. This is where it is important to be smart about how much you can afford and how much you truly love the house.
If you really do love the house and want to let the seller know, take time to write a letter. Work with your agent to get the letter to them and be specific about how you envision yourself and your family living in and loving their home.
“When we sold our house in 2016, we had 10 offers in the first 24 hours! Our agent made us a spreadsheet of all the offers and I was surprised to receive 4 letters from buyers who took the time to tell us why they really wanted to live in our house. It was tough to decide, but we were able to pick the best fit for our house and our neighborhood! We knew who would fit in well because we had lived in the community for so long. All of the offers were from qualified buyers, so the letter really was the way we made our decision!”