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Anyone who’s taken a scroll around Zillow lately won’t be surprised to hear it’s a seller’s market in much of the country. Erin Matthews, a realtor with Gassensmith Group in Crystal Lake, Illinois, says that this trend is due to lack of inventory. Over 2,000 miles away in Laguna Hills, California, realtor Nicole Palanjian with Onyx Homes says the circumstances are similar. “We are seeing multiple offers in Orange County and L.A. currently—homes priced correctly and remodeled are seller favorable.” Of course, the market outlook does depend on the area. In Nashville, Tennessee, for example, realtor Jordan Searcy with Onward Real Estate says, “Buyers are not having to fight for their homes and give away buying power like they were three years ago.”
Regardless of where you live (or want to live), all three realtors agree that house hunting with a few tricks up your sleeve can help you edge out any competition. Here are their top tips for buyers in a seller’s market.
1. Find Your Dream Realtor First
An experienced realtor will not only guide you through each step of the process, they can also give you a leg up by getting you access to private listings. “Seeing homes not yet listed reduces your competition with other buyers,” says Matthews. An effective realtor will also build a relationship with the listing agent, rather than simply emailing an offer, says Palanjian. “In a seller’s market, many offers are close in price and timelines, so a listing agent may choose the offer from the realtor they believe will ensure a professional and smooth transaction.”
So how do you land this dream realtor? Searcy recommends talking to your inner circle. “Ask your friends and family who they used for their home purchases and who they had an amazing experience with,” she says. “Random Zillow ads or reviews cannot refer to the top advisors like your community can.”
2. Go for Pre-Approval Over Pre-Qualification
“Don’t just get pre-qualified, get pre-approved—or better yet, get fully underwritten,” says Palanjian. “This makes your lending timeline shorter or non-existent, which allows you to compete with cash offers.”
For the uninitiated, here’s an overview of the three types of mortgage approvals, from the least to most involved (or weakest to strongest in the eyes of the seller). Pre-qualification, which takes as little as an hour when done online, gives you an estimate of how much you can borrow. But because it’s based entirely on information you provide, it’s a guess, at best. With pre-approval, which can take up to 10 business days, you’ll complete a loan application and get an offer from the lender with a specific amount for the loan. But, this is a bit misleading, points out Palanjian. “A pre-approval letter does not mean you’re approved for the loan. That’s the job of the underwriter.” More paperwork is required for underwriting, which takes time and can bring a level of uncertainty to a deal. That’s why getting fully underwritten approval is the ultimate in preparation. “It allows you to write offers that are almost as good as cash, and everyone knows cash is king in a negotiation,” says Palanjian.
3. Be a Flexible Buyer
Price isn’t the only factor a seller considers. That’s why Matthews recommends playing ball with any additional wishes and reflecting that in your offer. “Be flexible with your closing date and align your offer with the seller’s preferred terms,” she says. Another way to present yourself as an attractive buyer is to offer a rent-back agreement. “This is where the seller can stay in the home for an agreed-upon period of time until they find a new home,” says Matthews.
4. Have a Few Lenders in Your Back Pocket
Not only are you allowed to get pre-approved for a mortgage from multiple lenders, it’s often in your best interest to shop around for the most advantageous rates and lending terms (though you’ll likely have to pay for multiple application fees). Plus, says Palanjian, having multiple lenders on call, makes you a more competitive buyer. “This allows you to pivot your offer depending on what the seller wants, such as a quick close or a fully underwritten loan,” she says.
5. Consider an Appraisal Gap Clause
Appraisal gaps—when the appraised value of a home is lower than the price agreed upon in a sales contract—are where deals can fall apart, with lenders refusing to cover the difference. But, says Matthews, offering an appraisal gap clause will signal to the seller that you’re serious about closing the deal. “This is where you agree to cover the difference between the appraised value and your offer (up to a limit),” she says. “Determine if you have the extra cash, or make an offer with a smaller down payment to leave you with enough money for an appraisal gap.”
6. Limit Your Contingencies
“The less you ask from the seller, in terms of costs, can make your offer stand out above the rest,” says Matthews. Some ways to limit contingencies include offering to pay seller expenses, reducing your tax proration request (or the way you divide the property’s taxes), and going with an as-is inspection contingency, which “will tell the seller you won’t be asking for any minor repair requests or credits,” says Matthews.
7. Consider an Escalation Clause
Here’s another way to hold your own in a competitive market, according to Matthews. “An escalation clause automatically increases your offer by a set amount if there’s a competing bid, up to a maximum limit,” she says. “It shows you’re serious without overpaying unnecessarily.”
8. Resist the Waiting Game
“As the saying goes, ‘date the rate, marry the mortgage,’” says Searcy, who encourages buyers to act even if interest rates aren’t the absolute best. “Rates are malleable and change day to day,” she says. “You have the power to refinance, but you do not have the power to change the fixed amount of money you spent for a 30-year mortgage. No matter what happens with the rates, the house you have been eyeing will almost always cost you more if you wait.”