4 Tips for buying in a sellers’ market!
It’s been a seller’s market in Connecticut for several years now, with Covid boosting an already hot market. So, who are the lucky ones winning those bidding wars? And how are they coming out on top? There are definite strategies, and I’ll share my Top 4 here:
1. Get in Early and Have a Strong Offer
If priced properly, the most desirable houses can have accepted offers within about a week, if not days, so this is no longer a casual exercise. If you find THE place, you need to strike quickly. This following strategy has had some success, especially if you and your agent are aggressive: If it’s clear this will be a house that sells for over the asking price, and if you have a strong (or very strong), above ask offer, jump in, show them you want to have a quick, smooth transaction, and that you’d like a response to your offer within 24 hours. Then get that property under contract asap. (Sellers can entertain offers right up until they sign the contract.)
Some buyers will indicate the inspection “is for informational purposes only”, which indicates they won’t renegotiate based on the results (they still have the option to walk away, however), while more savvy buyers may waive the inspection entirely. Those items often greatly enhance the offer, because they remove a certain amount of risk from the deal.
The challenge here is FOMO. Sellers who have been dreaming of multiple offers and stratospheric prices may figure if one of the first buyers to see their property wants to offer X above asking, they should continue to show and see where things go. I have seen this aggressive approach both work and fail. But either way, getting in early is key.
2. Be Prepared
We at The Ray Martin Agency require bank pre-qualification or proof of funds if cash buying, before we show property. That’s because things can move so quickly that in order to have the option of making an offer before the field gets crowded or another offer is accepted, you need to have your ducks in a row. Offers won’t be entertained without one of those two items, so make that a first step in your buying process. It can also be helpful because your mortgage banker will likely share information about taxes and other closing expenses that could aid in determining what your budget should be.
3. Cash is still King
No surprises here. Cash wins the day often. But why, since the seller gets the same amount at the closing table regardless? Because one of the key risks to a deal with when prices are rising is a bank appraisal coming in short of the purchase price. Having 20% cash down has become the exception rather than the rule in winning bids of the most desirable properties in our area.
Do you need all cash? No. I would say the sweet spot is 35% or more, and the caveat is that if your agent is smart, they will present the extra amount down “to cover any appraisal shortfall”. If no buffer is required in the end, you keep the cash in your pocket and finance the 80% or whatever higher amount you’d prefer. Yet the seller will be comfortable that their deal is solid.
4. Have a Great Agent
Self-serving? Perhaps. But I had seven offers in on a listing of mine recently, and an agent who is a seasoned veteran didn’t include a key negotiation tool to her offer, which immediately relegated it to the middle of the pile. She said, “well we can cross that bridge when we come to it”, which was a poor strategy, because they would never make it to the bridge without that piece.
A great agent will think out of the box and ask the right questions. For example, they might ask the listing agent what really motivates the seller? Dollar price of course, but perhaps they want a quick close or even a delayed close so they can enjoy their final autumn in New England. Or they dread moving furniture they don’t really want anyway, and you agree to keep or get rid of whatever they want to leave. (Trust me, for some sellers that can be a huge relief and can get your foot in the door.) These present opportunities for adding “bonus points” to your offer, and a savvy agent can absolutely make the difference in your negotiating prowess. For more information on your timeline, contact The Martin Agency today.
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