As I wrote in April of last year, the days of getting a “deal” in buying a home are over. At least for right then it was. Well, guess what? IT. STILL. IS. Nothing has changed in the Kansas City market. It is still very much a seller’s market. Houses are selling fast and for top dollar.
So, how does a buyer navigate this crazy market? Here are 8 ways you can prepare yourself to win the house you want!
- Do the math before you get too hung up on small price differences.
Right now, it might be necessary to offer over list price, maybe as much as $5,000 (or more) over to win the house. Calculate beforehand, based on your interest rate, what the price increase will mean to you on a monthly basis, and decide where you will draw the line.
For instance, at 4.3% interest, bumping the purchase price of a house from $195,000 to $199,000 is $19.00 per month. Is that amount worth losing a house you love over?
- Base your offer on the home value, not the list price.
The list price of the house can sometimes be based more on the motivation of the seller than it might the actual market value. For instance, the seller might have priced the home to sell quickly due to a job change, or another situation where they need to be in their next home faster than normal. If the house is priced in the lower to middle range of market value, you could pay above list price, and still not pay too much for the house!
- If you see a home you like, be prepared to act fast.
It goes without saying right now that the days of “sleeping on it” is nearly non-existent in this market. You snooze, you lose is the truth. This goes for scheduling a time to go see the house in person, as well as making a decision on making an offer.
Houses right now are seeing multiple offers in a matter of hours, so you cannot be shy about making a decision quickly.
But, if you have your pre-approval from the lender already and know your budget, know the prices and types of homes you want and research those neighborhoods ahead of time, you will be confident and ready to make an offer as soon as you find the house you want.
- Don’t assume that the inspection period will allow you to reopen negotiations.
Many buyers think that the inspection period is a “get out of jail free” card. And in some ways they are correct. If there are major concerns with the house (like plumbing, electrical, foundation or other issues) in which the buyer is not comfortable purchasing the house with, there are ways to get out of the purchase.
And while the inspection period is a good time to ask for repairs to be done on the house before a purchase, it doesn’t necessarily mean a buyer can get everything repaired they want to be done. This is not meant to scare you, but in this market, some sellers are emboldened by multiple offers and feel as if they do not have to negotiate any repairs with the buyer. They can simply find a buyer willing to take the house as is. And legally, that is all a seller has to do; sell the house in its current condition.
So know going in that you may not get the seller to make everything perfect before you purchase it.
- Expect to compromise.
This goes with any house purchase, any time. But especially now, buyers have to be willing to give a little bit more than they are used to. The compromise is; if you want the house you love, you are going to have to give a lot. Doesn’t mean you have to lose every part of the deal, but know your probably are not going to win much, either. Your win is getting the house you want to live in for years to come!
- Remember that terms can be as important as price.
Can you be flexible with the closing date? Can you offer more earnest money? Maybe you are willing to shorten the inspection period to move the contract along faster? Are you willing to do more repairs than another buyer might? All of these things are tools you and your agent can use to make your offer stand out among the crowd.
Remember, the seller and their agent may know they are priced at the top of the market, so adding money to the deal may not actually matter if the appraisal comes in lower than that amount. Find what the seller wants and work to make your deal meet that if possible.
- Consider writing a personal letter (with a picture) or video with your offer.
Including a letter, photos or a video with your offer can be a huge advantage. It puts a face and story with the name. It’s not just another contract with names the seller doesn’t know. It’s now a person. A family. People want someone like them to enjoy the property as much as they did. Don’t underestimate how powerful this can be.
- Make your offer as simple as possible.
When sellers are staring at a table full of offers and trying to determine which one is best, your offer will be looked upon more favorably if you just keep it simple. There are many ways in which to write an offer that affect each party in a different way.
Buyers sometimes will ask for their closing costs to be paid for by the seller. Or ask that the seller provide a home warranty to cover appliances, or that certain items in the house to stay, etc. None of it is necessarily wrong to ask for, but when you are trying to win a multiple offer contest, all of those things muddy up the offer and can make it hard for the seller to determine the real value of it.
There are 2 main things a seller wants to know:
- How much they will net on the sale (how much money total out of the deal).
- When will the deal close (when will they get this money)
The entire deal and all of those pages of an offer boil down to just those two things. And a seller doesn’t want to do extensive math or be looking up values of things, etc. to find out the answer to question number one. So it would be advantages to you to make your deal super simple.
This market might seem really daunting to some buyers, and maybe you have avoided jumping in because you were afraid that you would get stuck in a bad deal, not be able to buy the house you want because of competition, or don’t have the right assistance to guide you through it all. But, if you hire the right real estate agent (who by the way is free to buyers) they will help make the process easier on you. There is certainly more work, time and sometimes a little more luck involved right now, but the right agent can help you get the right house for you and not feel like you were beaten up during the process.