3 keys to getting your favorite house besides the bidding war
1. Move fast when making an offer.
Generally speaking, when people first start looking for a house, they need some time to warm up and get to know the market. After deciding what type of house you are looking for, however, it’s time to take it seriously and plan strategically. If there is a house that you like, you must seize the opportunity quickly and assertively.
When a house you like comes onto the market, it is best to check the property and make an offer on the first day of listing. At this time, it is possible to avoid competition with other buyers and multiple offers. In a hot housing market like today’s, you can give sellers a certain period of time––such as 24 hours––to decide whether to accept your offer or not. This way, you can try to make the seller accept your offer before another buyer shows up.
For example, when I was working as a real estate agent, we proposed an all-cash offer for a house on the first day of its listing. The offer was made at full asking price, which means we did not bargain for a lower price. But the homeowner said that he wanted to make a decision after the open house on the weekend. I knew that by then there would be other buyers, so I told the seller that we are considering another house at the same time and wanted to know whether he can accept our offer or not today. The seller declined, but I sensed over the phone that the listing agent felt a little regretful. So I still sent the written offer to the seller’s agent and added a 24-hour deadline. If the seller’s agent receives a formal offer, he must present it to the client. After a while, the seller accepted our offer. If we waited until the open house, it’s very likely that there would be more offers. At that time, several buyers would have to compete and we would likely need to raise our offer price.
In a hot housing market, sellers would likely set a time to collect all the offers together––generally after the open house. In this case, the first person to make an offer is actually at a disadvantage. Because if you effectively communicate with the listing agent, you may collect more information, which could help you write a more attractive offer.
The example I mentioned earlier is an all-cash offer, and many people might say that the offer was only accepted because it was all-cash. Indeed, that’s true. Cash offers have advantages over others in that the appraisal contingency and finance contingency are already exempted. The seller doesn’t have to worry about the buyer withdrawing from the contract because of the failed loan application. The current interest rate of cash-out refinance is also fairly attractive. Generally speaking, homeowners can lend out cash worth 75% to 80% of their house value through refinance. If you already own a house and have paid off much of the mortgage, you might consider using this method to buy another house with cash.
2. Understand the seller's needs before placing an offer.
Every homeowner that sells a house has his unique situation and plans.
For example, some sellers need to buy a new house first and then sell the old one. If your timeline is flexible, you can readily accept this contingency in the contract.
Some sellers want to rent back their house for one month after the transaction. The mortgage companies generally allow you to arrange a rent-back for a maximum of 2 months. You can collect rent from the seller during this period, or even let them live there for free if the competition is fierce.
Some sellers want to transfer the property’s ownership as soon as possible, and some want to wait a little. The buyer’s agent needs to communicate with the seller’s agent and learn about all these needs before placing an offer. Generally, the selling agents are willing to pass on the information because their responsibility is to help their client find the best offer.
3. Most importantly, secure your mortgage first.
When a housing transaction fails, 70% of the time it’s because the buyer has some problems with his mortgage.
The first thing every home buyer should do is to find a loan officer and get a pre-approval letter.
The pre-approval here is not just a verbal pre-qualification that you might receive without checking the credit score. To get a pre-approval letter, you need to give the loan officer your income statements and tax bills, and the officer will check your credit score and decide what is the pre-approved amount of money you can get through a mortgage.
When sellers make choices among multiple offers, they know very little about each buyer’s financial situation.
At this time, if your loan officer contacts the seller's agent, confirms that your paperwork has been submitted and reviewed, and there is basically no problem with your mortgage application, your offer will certainly be given priority.
Finally, to sum up, when buying a house, you must work closely with your agent. A good house must be landed quickly. The agent must collect as much information as he can and make an offer that meets the seller’s expectations. Most importantly, the buyer must secure the mortgage in advance and let the loan officer inform the seller of your situation. Of course, you should always stay rational when competing for a house. After all, this is likely the most expensive purchase of your life.
I hope everyone can find their dream house soon!