Let’s face it. It’s intimidating to be a buyer on the housing market these days.
There is historically low inventory, as construction has lagged behind demand. Continued low interest rates have enticed an influx of first-time millennial buyers, and soaring home prices have kept would-be sellers on the sidelines as they ride the wave. For the homes that are available, there are often frantic bidding wars with sales well above listing price to buyers with cash on-hand.
These trends are particularly pronounced in the Triangle area of North Carolina, with the average home price rising by 17% through the first half of 2021, and LendingTree ranking the Raleigh metro area as the third-most competitive market for buyers in the country.
While it is more important than ever to stay calm and level-headed as a potential homebuyer, there are steps you can take to ensure you are prepared to put your best foot forward when you are able to find an available home.
Following these 10 tips will give you the best chance of making a winning home offer in a fast-paced, competitive market, even if sometimes the best move is to walk away.
1. Get Pre-Approved — Not Just Pre-Qualified — from a Local Lender
Don’t confuse a pre-qualification letter with a pre-approval letter. A pre-approval is a more in-depth analysis of your financial stability. Rather than simply checking your credit score and quickly running a calculation of your income vs. assets ratio, a solid pre-approval letter should state that your file has been thoroughly vetted. Your goal is to prove to the seller that there will be no skeletons in your financial closet once you are under contract. Using a local lender will increase the seller’s confidence that the process will go smoothly.
2. Strategize with a Full-Time Real Estate Agent Who Knows Your Current Market
Making a home offer in a seller’s market is not a good time to give your newly licensed aunt or uncle a shot at breaking into the business. Find an experienced Triangle real estate agent who knows the current market and can confidently explain how they can help you navigate the real estate landscape. A full-time agent who responds to emails and texts during off-hours is always a wise choice.
3. Don’t Be Greedy
When buyers are in control of the market, it’s easy to ask the seller to pay for some of your closing costs, a home warranty or personal property like the refrigerator, washer and dryer. But when the seller is in control, you want to make the offer as clean as possible. Don’t be greedy and ask for seller concessions, especially in a market where some sellers are even waiving contractual contingencies. This will only reduce the seller’s bottom line and will make your offer weaker than the rest.
4. Go All-In with Your ‘Best and Highest’
Since many properties receive multiple offers within the first couple of days — or even hours — on the market, you may never get a chance to negotiate with the seller. It is not wise to start with a low offer. In fact, in a highly competitive market, you may never get a chance to modify your original offer. If this house is ‘the one,’ make sure you give your best and only offer.
5. Include a Healthy Due Diligence Fee
The seller wants to know that you have ‘skin in the game.’ Not only does your due diligence fee indicate you are serious, but it also gives the seller peace of mind knowing that if something happens and you cannot close, they will not be left holding the bag. Local market conditions vary, so be sure to depend upon your experienced real estate agent to advise you on an amount that might make the seller take notice.
6. Tighten Up the Inspection Period
The longer of a time frame you ask the seller to allow you to complete inspections, the longer they will be biting their nails. Try to assure the seller that you do not intend to leave them in limbo for an extended period of time. Since you may be at the mercy of the home inspector’s schedule, your experienced agent might be able to draw from their recommended list of contractors. Always ask for referrals.
7. Consider Waiving Inspections on Newer Homes
Older homes might leave you with some uncertainty as to what may lie beneath the surface. But if you find a newer home that looks and feels nearly perfect, you might win the offer on a gamble that a home inspection may not reveal any deal-breakers. If this is the case, consider waiving your right to a home inspection. While it may not be wise to go in with your eyes completely shut, you could gain some leverage by communicating to the seller that you accept the home in its current, as-is condition and that you will not ask for any repairs.
8. Pay Cash and Waive the Appraisal
You’ve probably heard the old phrase that ‘cash is king.’ This certainly holds true when a seller receives multiple offers that include financing contingencies. If you are fortunate enough to be in such a position, a cash offer will keep the seller encouraged that the purchase won’t be killed by an underwriter a few hundred miles away. Your cash offer will rise to the top of the list. And since there is no underwriting involved in a cash offer, you have the option to waive your right to an appraisal.
9. Write a Personal Note To The Seller
Including a personal letter with your home offer can be a little risky, not to mention that it is sometimes discouraged by some real estate commissions. A letter describing you and your family with terms prohibited by fair housing laws is not advised. Instead, consider letting the seller know how you felt when you first entered their home or toured the community. You may also want to compliment them on how well they prepared their home for sale. Try using words that let the seller know they would be selling their home to someone who will love it as much as they do. You can make it personal, but be sure you are not violating any fair housing laws.
10. Be Flexible on the Closing Date
Each seller will have different needs affecting their ability to coordinate their move with your move. Being flexible on the closing day and time will give the seller some comfort and breathing room as things progress. You might also want to consider including an option for the seller to ‘lease-back’ for a short period of time once escrow closes.
It can be a stressful market for homebuyers, but considering and preparing for these steps in advance will focus your energy toward getting in front of the seller when the time comes. Just as importantly, you’ll be less likely to overpay for a home in the mad scramble and will feel more comfortable walking away when necessary.
About Drew Ludlow:
With nearly two decades of real estate experience, Drew Ludlow is the Broker-in-Charge at Ludlow Real Estate Group, a real estate firm in Apex, North Carolina. He specializes in residential sales, first-time homebuyers, repeat homebuyers, short sales, and foreclosures. Drew is a licensed broker and a member of both the National Association of Realtors® and the North Carolina Association of Realtors®. He is a multi-million-dollar producer in residential and investment real estate sales, and considered to be a top producer among Realtors® nationwide.