It is not rare for buyers to find themselves in the middle of major bidding wars for desirable homes. The great news, however, is that you don’t have to have the most money to make your offer stand out. Following are the best strategies for negotiating and property purchase.
Get Your Funding Squared Away First
Always, always start your search for property by getting your funding squared away. In the current buyer’s market, you’ll be competing with all-cash offers more often than not. A pre-approval letter will give sellers the assurance they need to give your offers fair consideration. If you’re brand new to this process and have never purchased or owned a home before, never make the mistake of confusing pre-qualification with pre-approval. Pre-qualification is quick and easy and entails no actual review of your finances. This will provide you a basic overview of how much lenders might be willing to offer but should only be used in the very formative stages of the budgeting process.
Conversely, pre-approval means that your finances have been diligently reviewed and that lenders are indeed willing to work with you. With a pre-approval letter in hand, you’ll be able to compete with better-funded buyers by making a personal appeal to properties, limiting the number of contingencies on your offer and being flexible in both closing times and the assumption of closing costs. Once you’ve been pre-approved, you should avoid many of the common mistakes that buyers often make such as applying for other lines of credit to finance the purchase of new cars or new home furnishings. These additional loans will alter your debt to income ratio and the amount of money that lenders are willing to extend. Ultimately, funding is not guaranteed until your loan application is in the hands of the underwriter for final processing.
Cash Is Currently King
In this market, cash is king. There are tons of cash-rich buyers out there who are willing and able to pay the total costs of their purchases up front. In addition to funding being guaranteed, cash purchases also expedite the close of escrow and limit the amount of escrow charges that sellers are directly or indirectly responsible for. Thus, if you can, making an all-cash offer is currently the best way to shine when competing for high-interest properties. There are, however, some benefits and protections that both buyers and sellers can gain by opting for lender-financed sales. Thus, if you find yourself competing with several cash-rich consumers, you shouldn’t give up right away.
Be Mindful Of How Contingencies Will Impact Your Offer
All-cash buyers are not just defined by their impressive spending abilities. They are also known for having an incredible sense of entitlement and may put some contingencies on their offers that weaken their appeal. If you’re working with a lending institution and will finance some or all of this purchase with loans, certain contingencies are unavoidable. Apart for the contingency for funding approval and the ever-essential inspection contingency, however, try to limit the number of additional, non-essential contingencies that you add to your offer to keep it strong.
Consider The Benefits Of Taking A Personalized Approach To Connecting With Homeowners
There are often benefits in submitting a personalized appeal to homeowners, especially when dealing with sellers who have lived in their homes for quite some time and have raised their children there. These individuals are more likely to have emotional attachments to their properties than not. As a result of these attachments, they are often eager to see their properties go to consumers who will appreciate and value them as much as they have. Thus, even if you don’t have as much money as some of your competitors, you may have the perfect backstory for making your offer stand out. This means that it never hurts to draft a personal letter to accompany your offer that details why you want the home and how you intend to use it.
Have your agent get a list of comparable properties in the area to review their recent sales prices. Going into negotiations well-researched will give you the best opportunity to submit an offer that appeals to the seller. It is necessary to remember that all, ordinary negotiation rules still apply, and this means that you have to have a precise walk-away point established and negotiate with the seller’s walk-away point in mind. Remember that cash buyers often submit the lowest bids and thus, if your competition is entirely comprised of cash-rich buyers, you can lower the price of your opening bid to account for this.
Never Forgo Property Inspections But Schedule Them Right Away
Some people who are in a position to do so may attempt to increase the appeal of their offers by forgoing professional property inspections. This eliminates the inspection contingency and expedites the closing process. It is also, however, is the surest way to set yourself up for financial heartache. The home inspection will reveal problems that buyers have either failed to disclose or were unaware of themselves. Rather than forgoing the inspection to expedite the closing process for sellers, try paying a bit more to schedule the inspection right away. This can be just as rapid and yet; you’ll still retain all of the financial protections that a professional inspection provides. Sellers who push buyers to close fast, even at the sacrifice of their inspection contingencies, may have something to hide.
Be Willing To Accommodate The Seller’s Schedule
Surprisingly enough, money isn’t always everything. While you’ll certainly come across some sellers who are eager to take offers from cash buyers, even though these offers may be significantly less than your own, most cash buyers have a sense of entitlement that others do not. This is especially true when these individuals are snatching up homes purely for investment purposes and are eager to close deals fast. Their hastiness could shut them out given that seller’s often have extenuating circumstances of their own. They could be waiting for escrow to close on the purchase of their new homes and may need more time to relinquish their properties. Being flexible in how long you’re willing to wait for escrow to close could make a substandard offer shine. This is especially true if you’re forthright and clear about your willingness to remain flexible and do not load your offer down with a ton of contingencies.
Whether you’re competing with a few cash-rich buyers or are in line with countless lender-financed buyers for an extremely appealing home, the right negotiating strategies can set your offer apart. These can include a willingness to raise the purchase price, but you can also win bidding wars without having to part with more money. Flexibility and a personal approach can do wonders and may be exactly what’s necessary to close the deal.