How To Put In a Successful Real Estate Bid In a Hot Housing Market
Though the housing market isn’t quite as hot as it was in 2021, low inventory is still creating a competitive market. Home prices are expected to continue rising but not to the level of 20% like they did in 2021. Interest rates are higher this year, which means your budget for a home might be lower than you had previously figured.
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Get Preapproved
“If it’s not immediately crystal clear to the seller that you have your financial ducks in a row, you will likely be ruled out immediately,” said Blakely Hull, a real estate agent with Avenue 8. Being pre-approved for a mortgage (not just pre-qualified) can show sellers that you’re serious and financially qualified to buy. Even better, have the underwriting in process when you place your bid.
It’s important to note that being pre-approved doesn’t mean you have a mortgage contract in place. You’ll still need to officially apply and go through full underwriting before the loan is secured. If your financial situation changes in the meantime, the loan could fall through.
Be Realistic
Blakely warned that no home is perfect, so if you’re looking to check every single box on your “wants” list, you’ll end up with nothing. “In a market that moves fast, be in touch with your must-haves vs. your nice-to-haves,” she said.
It can help to spend time with an agent who has an intimate understanding of the current market. “A good agent with a finger on the pulse can help buyers understand what it will take to win while also ensuring buyer comfort,” Blakely added.
Meet the Seller’s Needs
Tailoring your offer to meet the holistic needs of the seller is usually the best strategy for getting your offer accepted, according to Ryan Dibble, COO of real estate startup Flyhomes. “Sometimes that is all about price, but sometimes it isn’t,” he said.
For example, the seller may want to close ASAP. So if you can offer an earlier closing date — and even a short rent-back period to allow them an easier move into their next home — you end up the most attractive buyer.
Include an Escalation Clause With Your Offer
An escalation clause (otherwise known as an “escalator”) is a clause that states a buyer is willing to raise their offer if another buyer outbids them. This gives you more security that when you submit your offer, you won’t immediately lose out due to a higher bid. There is usually a cap on how much the buyer is willing to pay to ensure they have the highest offer.
Waive Contingencies
Contingencies are conditions that must be met prior to closing on a home. They protect the buyer from things going wrong, but can also create a hassle for the seller. “Removing contingencies strengthens your offer, even if it isn’t the highest one on the table,” Dibble said.
Just be sure you’re comfortable with what you agree to. For instance, you don’t want to waive a home inspection and end up with a property that has $20,000 in hidden damages.
Pay Cash
If you’re lucky enough to have a ton of cash on hand, you can use it to your advantage. “Sellers prefer cash offers because they close faster and eliminate the risk of the mortgage not getting funded,” Dibble said. Cash offers can give you much more negotiating power plus help you save thousands on the transaction.
Offer Over Asking
In cities with a particularly hot real estate market, you might consider immediately submitting an offer that’s more than the asking price if you can afford to. If you really love the home and want to ensure you outbid other buyers, this is a good way to go.
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Sam DiSalvo contributed to the reporting for this article.
