Buying a home in a city where homes go fast? These strategies will help you win the bidding war.
The average home spent 86 days on the market in April, according to Realtor.com. But that’s downright luxurious compared to areas like Denver, for example, where the average house sold in just 25 days. In these cities, bidding wars are the rule: Tyler McKenzie of the Seattle-King County Association of Realtors, says one Seattle home spent a mere week on the market and received over 40 offers.
More: 12 CitiesWhere Homes Are Flying Off the Market
How can buyers compete? These tips will help your offer come out on top.
Be prepared to move fast
When houses are selling fast, you’ve got to be faster than rival buyers. “No buyer can succeed if they don’t pull out all the stops,” says McKenzie.
Do your research ahead of time to hone in on exactly what you’re looking for. Paula Swayne, president of the Sacramento Association of Realtors, says buyers should check out houses in their target neighborhood four-to-six months in advance.
Hire a realtor with local expertise who can prepare you for what homes will cost. That way, when you do find that dream home, you’ll feel comfortable making an offer that will be taken seriously.
When you’re ready to house hunt in earnest, don’t just rely on general searches of listings sites like Trulia and Zillow. Ask your agent to put you on an email list so you’re notified as soon as houses hit the market.
Have your finances in order
Unless you’re paying cash, you’ll need to demonstrate to the seller that you’ll be able to seal financing and close on time. Get pre-approved—not pre-qualified—for a mortgage in advance. In Denver, “pre-qualification is not worth the paper it’s written on,” says Denver Metro Association of Realtors’s Anthony Rael.
Even the type of mortgage may affect seller perceptions. A low-down-payment FHA loan, for example, may lead sellers to assume the buyer has less-than-excellent credit and may not be able to close when the time comes, says Ruby Grynberg, founder of Salmon Bay Community Lending.
Have all your paperwork in order, and be ready to document the funds you’ll use for your down payment.
Don’t pussyfoot around
If you’re financially ready to buy, waiting around won’t do you much good. There’s no “gem under the rock,” McKenzie says. Not only do you risk prices going higher, but interest rates as well.
Byron Bogaard, CEO of the Central Valley Association of Realtors in northern California, recommends researching pricing trends in your market (ask your agent and check the Data page of Realtor.com) to help you gauge how quickly you need to move.
Then, once you find a home you love, you must put in an offer immediately. Talk negotiating strategy with your agent ahead of time. In the case of multiple bids, where homes are going for above the asking price, you might consider what’s called an “escalation clause” that automatically tops any other offers by $1,000. Just be sure to set a cap to ensure your bid doesn’t go above your comfort zone, says Don Frommeyer, president of the National Association of Mortgage Brokers.
Make the seller’s life easy
You don’t have to pay cash or even offer the highest price to win the deal. Be an easy customer. Show the buyer you’re serious by scheduling a home inspection immediately, no later than a week after agreeing on a price, Rael says.
Offer to rent the house back to the seller once you own it. Brendon Desimone, consumer blogger for Zillow.com, says sellers often need the proceeds from their home sale to buy a new one but don’t want to move twice. Giving them the option to rent for a month or three while they search for a new house might give you an edge.
Pay your seller’s closing fees. If there’s a bidding war, offering to take care of closing fees (not the agent’s commission, which can run as high as 7% of the sale price) may satisfy the seller more than increasing your bid, Swayne says.
“Seller’s closing costs aren’t that much,” says Swayne, and covering that expense “makes the seller feel really good.”
Write a letter to the seller
It might sound corny, but tugging on the seller’s heartstrings can win the day. Swayne advises clients to send a letter to the seller, along with a group photo, explaining how owning the house would affect their lives.
In one case, a buyer wrote that they could picture their young daughter, all grownup, walking down the home’s staircase in her prom dress. It worked. Not only did that family get the house, but Swayne says the seller even accepted a lower offer.
A personal letter increased an offer’s chances of success by 9% in 2013, says Redfin.