The U.S. as a whole has been experiencing a seller’s market, especially because the COVID-19 pandemic pushed 65% of sellers to hit pause on listing their home, resulting in even lower inventory.
In a seller’s market, it can be hard for buyers to win a home — much less at a decent price, as home prices are expected to continue to rise. But, there are a few tactics that can help you get an offer in and have the best chance of having it be accepted by the seller.
What is a seller’s market?
First, it’s important to understand what makes a seller’s market. This is when demand from buyers exceeds the number of homes available on the market, causing buyers to engage in bidding wars to snatch up what little homes are available.
In a seller’s market, sellers have the upper hand in both negotiations and purchase prices, and homes may also sell in a week or less in hot markets.
Make a lot of offers
We’re now seeing lots of offers get rejected by sellers. You’re unlikely to win the first house you submit an offer on, so you’ll need to look at lots of houses and submit lots of offers — and quickly! If you’re able to tour a home and submit an offer within a day or two of it being listed, you’ll cut down on some of your competition. But because this fast market is becoming more common, expect that you still may be outbid by other buyers.
Don’t get too attached to one home
In the past, buyers would find their dream home, take their time evaluating the property, submit their reasonable offer and move in. In today’s market, this is not the case. Instead of focusing on one home you love, adjust your expectations and lay out your priorities in a home. Then, find several that fit those criteria and make offers on them as soon as possible — this is especially true if you’re on a tight timeline for moving. But don’t be afraid to walk away — it’s better than offering too much on the home.
Get preapproved for a loan
Getting a preapproval letter from a lender can help sellers know that you’re serious and that your offer is less likely to fall through. This makes your offer more attractive to sellers, even ones that offer more money than you do. If a deal falls through, the seller may have to go to a backup offer or even start over by listing their home again. To get a preapproval letter, go to your bank or credit union and provide basics about your income, debt amount, and credit score.
Make a great offer
Now is not the time to try to get a deal by making a low offer and assuming a buyer will negotiate. In this competitive seller’s market, they’ll just move on. Instead, make your best offer first.
Also, try to remove as many contingencies as possible. Contingencies give you the right to back out of your contract under specified circumstances — such as your financing falling through due to a low appraisal, your own home not selling, or not passing an inspection.
Some markets are even seeing “as is” offers and buyers giving up their ability to have an inspection become more and more common. Offering a quick closing or paying a portion of the seller’s closing costs can also put your bid closer to the top of the list.
Offer cash or a large down payment
Paying cash can be a huge positive to a seller. The National Association of Realtors (NAR) found that 21% of contracts that were terminated were done so due to financing issues — usually because a home is appraised too low and the lender backs out. The more you can offer in cash through your down payment, the better and can give you an edge on other offers.
Offer more earnest money
Just like a preapproval letter shows you’re a serious buyer, so does offering a high earnest money deposit. Don’t confuse this with your down payment. Earnest money — also sometimes called a good faith deposit — is an amount you pay when you submit an offer that is typically non-refundable and reassures the seller that they’ll receive at least some compensation if the deal falls through. Although a usual range is 1-2% of the offer price, offering 5-10% in a seller’s market may be enough to sway the seller in your favor.
You don’t necessarily have to offer the most money to have the most attractive offer to a seller. Other factors — like those mentioned above — can carry a lot of weight, reassure the seller that you are a serious buyer, and make for a quick closing.