Buying A Home In A Decidedly Sellers Market
Buying a home is a dream for many. But in today's seller-driven market, that dream can sometimes turn into a nightmare.
From multiple offers to a "new normal" (seller's not being willing to pay closing costs, for example, or asking to have inspection or appraisal contingencies waived), the current real estate environment can make buying a home tough. But for those with perseverance and a willingness to think creatively, it is still possible to score your dream home.
1. Look at the road (or in this case, the house) less travelled. If a house has been on the market for more than a few days in this hot market, then it might be one to consider if it meets your basic criteria regarding square footage, number of bedrooms/bathrooms, area of town or neighborhood, etc. This usually means that the property may need a little updating (EVERYBODY seems to want white walls these days) or may have something a little quirky about its layout. But if you are willing to put in a little effort, or to put on your creativity thinking cap regarding how the house might work for you, you may create instant equity with some simple changes.
Do keep in mind that there are some things that cannot be overcome and may be the reason a house sits on the market -- if it is on a busy road, in a flood plain or next to an industrial park, those are likely issues regarding the property that cannot be overcome.
2. Consider houses that do NOT meet your immediate criteria. This may seem to somewhat contradict #1. But if, for instance, a three bedroom, two bath (the most popular request for most people looking to buy a single family home) is a must have for you, then a four bedroom, one bath may have the room or layout to convert one of those bedrooms into a bathroom. And by the way, a lot of people will not even look at a house with only one bath, making for a smaller pool of competitors for such a house.
3. Ask your Hospitality Network Group Realtor if they know of houses that are not on the market. The real estate industry is all about cooperating with other agents. Nevertheless, we may be aware of a house that is coming to market, or has recently gone off the market. Both of these scenarios can potentially uncover inventory that is not currently visible to everyone else. Similarly, we have techniques we can employ to try to bring a house to market that meets your needs if you are focused on a particular neighborhood. Ask your favorite HNG Realtor how we can do this.
4. Lastly, consider not just price but the terms of an offer. If you do find yourself in a bidding war for a property, there are numerous elements to a deal that can give you a greater chance of succeeding in having your offer ultimately be the one that is selected.
- Use of an escalation clause. Not all listing agents will accept an escalation clause, but if they will, this can allow you to pay over the asking price if needed without paying more than is necessary for a property. On a property listed for $250,000, an escalation clause may read something like this: "buyer will pay $100 over the next highest offer up to $265,100" If there are other offers and the highest one other than yours is $260,000, then the escalation clause would result in our client (YOU!) being able to purchase the home for $260,100. Of course, there could be someone who offers $270,000, and then their offer may be the one ultimately selected. However, price is only one term criteria.
- Purchasing a home as is. Letting a buyer know you are not going to ask for them to complete a long list of minor home repairs can be an attractive carrot to dangle. Buyers can still do a home inspection and if there is something major, would still have the opportunity to walk away from the purchase based on the unsatisfactory results of a home inspection. Some buyers go so far as to waive a home inspection but this is not something that we recommend.
- Waving the appraisal contingency. Financed purchases will require an appraisal. Cash deals do not. You can waive the appraisal contingencies in both cases but need to be aware that if you are financing and waive the appraisal contingency, and then the home does not appraise for the purchase price, you will need to come up with the difference between the appraised price and the agreed upon purchase price.
- Both waiving of home inspection and appraisal contingencies can be ways to make an offer stronger but also can potentially create a dangerous situation for the buyer. Proceed with caution when considering waiving inspection and appraisal contingencies.
- Offer to pay the seller's closing costs in addition to your own
- Write a "love letter" to introduce yourself to the seller. Sometimes this can help sellers to become more invested in a particular buyer. Your Realtor can also speak with the listing agent and try to find out what is important to the seller, and then this can be reflected in the letter as well. So, for example, if you find out the seller needs a quick close this can be something that you as the buyer might be able to accommodate, if you are making a cash offer or work with your lender to try to close in under 30 days. Or when you tour the home, you might take note of shared interests you have and can speak to in your letter.
While all of these techniques are not sure fire, when used successfully by a buyer with an open mind, they may result in you finding and getting the house of your dreams sooner rather than later.
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