It’s already a very competitive real estate market for home buyers. There are far more buyers than there are homes for sale. Interest rates continue to rise to well above all time lows, but still much lower than most have seen in at least 20 years.
Submitting offer after offer, only to be beat out by someone offering more, having a larger down payment, or the sales price exceeding what you qualify to buy is enough to make many folks suspend any hope of buying a home right now.
Seasoned real estate agents will advise you to manage your expectations even before you start searching homes for sale on the internet.
There’s an old saying that says that “if you fail to plan, you plan to fail”. Normally, you’ll hear this line being used in the context of creating a business plan or some other strategic planning event or activity.
how do I love thee? Let me count the ways!
I can’t think of a more important business plan than shopping for a new home! What I want to share with you, is a process for targeting your home search to optimize your negotiation power, reduce competition and allow for a more relaxed and focused effort on finding the right home.
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Create a “Must-Have” List
Your one in a million, absolutely perfect dream home is out of your price range.
Let’s just get that out in the open right now so we can get to the business of saving you days, weeks and even months off your home search.
The first step is writing down your “Must-Have” list. This list will include everything you can think of that could, or would, help sway your buying decision in one direction or the other.
To begin with, this list should be long and as detailed as possible. Write down everything and anything you would want in a home. Your list can include anything from how far of a commute you will tolerate, to granite counter tops. Don’t be afraid to invest at least an hour into this process.
Once you have your initial list, you’re going to further break it down into 3 categories
- Must Have – non negotiable items
Example: 3 bathrooms. If there is not 3 bathrooms, eliminate the home from consideration. Other examples of non-negotiable must haves might be, maximum commute and school district.
- Need – almost a must have, but could compromise if absolutely necessary.
Example: Large yard for dog. Maybe the yard isn’t as large as you would have liked, but there is a large pet friendly part within walking distance of the home.
- Want – Could easily make up for compromises elsewhere
Example: Modern kitchen. Maybe the kitchen looks like it’s straight out of the 70’s, but it’s big, roomy and shows lots of potential.
Now that you’ve identified the must haves, needs and wants of your new home, you have a road map for your agent to follow to find homes that you would be most interested in.
Having the patience to focus your search on homes that have passed your initial test, you can now take a more aggressive approach to getting your offer accepted.
By narrowing your home search only to the homes that you’re most interested, you can spend more time doing research, and less stress as you know that you did your homework and you made your highest and best offer.
Making Competitive Offers
Expect a lot of competition in most price ranges when trying to buy a home in today’s market. The most aggressive approach you can make is to be competitive, and be prepared to offer more when the counter offer comes back.
In most multiple offer situations, you will receive a blanket counter offer for highest and best offer. Here are a few tips that will help you keep your edge in round 2.
- Shop for homes within a price range below the maximum amount you qualify for.
To be competitive, you’re going to need some wiggle room. Too many times we see folks get their hopes up when their agent submits and offer for more than they qualify for. This is a rookie mistake and your agent should be fired.
- Full lender approval.
There is a big difference between being pre-approved, and being pre-qualified. With a firm loan approval, even if you’re beat out on price, you have a strong shot at being a back up offer and taking a chance that you’re next in line.
- Understand your contingencies
An aggressive offer strategy may include a conversation about waiving or modifying contingencies. With a strong loan approval and great communication between your lender and your agent, this strategy might be an option for you.
A typical compromise may be the the seller wants the financing contingency removed in 15 days instead of the standard 17 days.
Your Competitive Edge
With a communicating and confident buying team, you could be more aggressive with your initial offer, your highest and best offer, and compromising on some of your contingencies.
Your lender and your agent should be able to launch a buying plan for you that includes fast communication and customized pre-approval letters,
With these tricks under your belt, you are prepared to go into the home buying process armed with every tool available to you.
Having a plan and making informed decisions will make your offers more competitive and improve the chances of having your serious offer accepted.
Do you have any experiences, expectations or stories of your own to share? Competitive offers accepted is a great story that can help many others in a similar situation. Tell us your story?