From coast to coast, Americans are seeing hot seller’s markets. In Stockton, California, homes sold in just seven days for 1.7% above the asking price in February 2021. And in Richmond, Virginia, homes sold in 9 days for 1.9% above asking. With the high buyer competition in these tough seller’s markets, how can investors make their offers stand out?
Here are three keys to getting your offer accepted in a hot seller’s market.
Increase the Down Payment Amount or Offer Price
Higher down payments and cash buyers have an edge in seller’s markets because the sellers appreciate the increased likelihood that the buyers can finance the deal. A higher down payment could tip the scales in your favor.
And if you can’t increase the cash available to put down, you may need to increase the offer price.
In early 2021, more than 36% of homes for sale in the U.S. sold above the asking price. That’s over a 14 percentage point increase from 2020. There’s no room for low-ball offers in these markets. You need to come in strong with your highest and best offer if you want a chance of getting your offer accepted.
With PropStream’s smart evaluation tools, you can generate a list of comparable properties and automatically create a comparable market analysis for an accurate property valuation in minutes. This will help guide your offer price, especially in the heat of a bidding war.
And with the new PropStream mobile app, you can access these tools directly from your smartphone. So you can make informed decisions in real time, even while touring homes.
To make your offer more attractive, take out as many sticking points as you’re comfortable with. This means removing contingencies for a clean offer.
Common contingencies include:
- A home sale contingency: This makes the deal contingent on the sale of the buyer’s current home. In a hot seller’s market, there’s no need to include this contingency because the buyer’s current home will likely sell quickly anyway.
- An appraisal contingency: This contingency requires the property to appraise for an amount equal or greater to the offer. To waive this contingency, the buyer needs to be willing to pay the difference between the appraisal amount and the offer price out-of-pocket if the appraisal comes in low.
- A financing contingency: If you have the funds to make an all-cash offer, you can waive this contingency.
- An inspection contingency: It’s risky to waive the inspection contingency, but some buyers are getting around this by having an inspector attend home showings to complete a quick on-site inspection so the buyers can waive the formal inspection contingency.
Get Creative With the Offer Terms
If offering a higher price and waiving contingencies isn’t enough, you might be able to get your offer accepted with creative terms.
Consider an escalation clause. This clause allows the buyers to automatically increase the offer amount to match the amount of competing offers, up to a set amount. In a bidding war, this streamlines the process and makes things easier for the seller.
A lease-back is another creative term that appeals to certain sellers. If the sellers want to continue living in the house after closing (either because they need more time to move or because they want to retain possession despite selling the ownership), you could lease the property back to the sellers for a set period at a set rate. This arrangement might be more valuable to some sellers than an inflated price.
It can be discouraging getting multiple offers rejected in our current seller’s markets. But by increasing the amount, waiving contingencies and offering creative terms, you can get your offer accepted.