How to be the winning buyer in a Seller’s market

There is nothing more frustrating for a Home buyer that is ready to buy their next home, previewing dozens homes, and when they finally find one that speaks to them, they make an offer only to find out that their are four other offers that they are competing with..this is a common occurrence in the South Orange County Seller’s market.

To make sure we are all on the same page…a Seller’s Market is when there are more Buyer’s shopping around to buy a home than there are Seller’s who are wanting to sell the home…it’s a shortage of housing inventory and  is the basic economic fundamentals of “supply and demand”.

Below I outline the 4 things you can do to beome

1- Have a good Real Estate Agent

This may seem as a self serving point…and it is, but it’s also true. 89% of Home sellers sold their home through a real estate agent or broker, and 87% of home buyers purchased their home through a real estate agent or broker. Clearly if you are serious about buying a home, you should maximize you odds of getting a home. Here is what I deem a good real estate agent.

  1. Make sure you like them. Believe that whether or not you like someone is the single most important qualifying criteria there is to choosing your Agent, and for most peopled you’ll get a good or bad vibe from someone one within the first 60 seconds of meeting them. You’re going to be communicating with your Real Estate Agent often, so if speaking with them makes you cringe, then you should should consider working with someone else.
  2. Get someone with experience. This is important. For most people, buying a home is their largest financial investment they will make, you don’t want to put this important task in the hands of just anyone. Experience is not solely based on time in the business, it also has to do with the amount of business done.
  3. Make sure their not to busy for you. I’ve found that the busier the person When you call or email your agent, how responsive are they? When you want to see a property, how soon can they accommodate? These are things to consider when working with a real estate agent. For me, I don’t like calls going to voice mail, so I try to answer each call. If I can’t, I want to return the call ASAP, but at least within a few hours…if only to share that I’m currently tied up.

2- Accept the reality of the market.

Here’s the simple truth of the matter…homes sell fast, at the time i’m writing this post, the average time on market for a home to sell in South Orange County if 45 days and many homes sell for above the listed price. This is the reality of the market, and there is nothing you can do to change it. So the only option is to adapt and overcome. Additionally, as the time on market is so short, you’re not going to have a whole lot of time to “think about” things.

3- Get pre-approved, not pre-qualified.

If you’re a cash buyer, then this step doesn’t matter. If you’re not buying all cash, then this is important. The difference between being pre-approved, and pre-qualifed is the difference between having the funds to buy the home and “maybe” having the funds to buy a home. In today’s Seller’s market when competing offers are the normal, you want to makes sure that you have been fully qualified and you have a commitment from a home lender that all you need to do is find a house. Why is this important? Because when you find that home that “speaks to you” the Seller is going to want proof that you can purchase this house…and having a “maybe” i can get financing letter from your home lender, isn’t going to cut it. So here’s what you need to do.

  1. Meet with a loan officer. Speak with your Real Estate Agent and get a referral to whom they recommend. Your real estate agent will have a loan officer whom they have worked with that will not only treat you right, but will probably also provide you with aggressive pricing.
  2. Go through full loan approval. This is going to take some time (5-7 business days), but it’s well worth it. You are going to have to provide the loan officer your financial supporting documents, i.e., taxes, payroll stubs, bank statements, etc. The loan officer will package all of the information together and submit it to underwriting. Once it comes out of underwriting you will have an approval, or a denial.
  3. Pre-Approval Letter. Once you get your approval, your Loan Officer will provide you with a loan commitment letter. This letter will be included with any offer that you make.

 4- Act fast and make your best offer. 

When you find a home that “speaks to you”, you need to be prepared to make an offer and you need to put your best offer forward. The way I counsel my Clients is to make an offer to where if they don’t get accepted, it doesn’t put them in a depressive state because they weren’t willing to go any farther. Putting your best offer forward, doesn’t just mean price, here are other things that can make your offer more appealing than the competition.

  1. A larger earnest money deposit. Earnest money is a deposit showing that you are sincere in purchasing this property from the Seller and in the event of default could go to the Seller as liquidated damages.  The larger the amount of earnest money, the more sincere you’ll appear to the Seller and shows how serious you are. However, the opposite is true as well. The typical amount of earnest money  is 1% of the offer price, and what most Home buyers offer…so if you want your offer to stand out…increase this amount.
  2. No contingencies. If you make your offer with zero contingencies…or few contingencies. Contingencies allow a Buyer to cancel a contract without losing any earnest money. So if you want your offer to stand out, have very few or no contingencies. Going into a home purchase with no contingencies is risky, you should have some, such as a contingency to inspect the property and a financing contingency to make sure the property will qualify for your type of loan. If you’re going to have contingencies, make sure the time lines are short, 10-14 days is a reasonable amount of time to get everything done.
  3. Close quickly. I’ve never met a Seller that wants to drag out a transaction very long. The longer it’s dragged out, the more likely the transaction will fail. How fast you can close will be dependent on many variable, the most common is funds. If you are a cash buyer, you can close very quickly. If your obtaining financing, you’ll need some time. However, if you got pre-approved for a loan as mentioned in item 3 above, then 3 weeks is a reasonable time frame.