If you’re getting frustrated and tired of not being able to buy a house because the market is so hot, we have got the info for you. Maybe you’ve made a bunch of offers and they’re not getting accepted? Perhaps other buyers are beating you to the best properties? Maybe you’ve just heard stories of other people struggling and not getting a property? Either way, I’ve got the answers for you. In this post, we’re going to go over 15 strategies to help you purchase a home in this crazy market.
A quick caveat, I’m a licensed real estate agent in Arizona and I run a team in California. The rules are always changing, so, if you’re not working with us, you’re going to want to check with your realtor before you execute any of these strategies. Make sure it’s all legit and above board and that you’re comfortable with it. Some of these strategies have some risk associated with them and could cost you some money.
1. Look at old listings.
This is something to consider doing especially if you’re a buyer who needs some closing cost credit or if you’ve got a low down payment. It’s probably not the best scenario for you to go run out to the very best properties the day they get listed and fight against the people who are buying cash. If you wait for a listing that’s been around a week or two, it’s probably a little overpriced when they listed it, or it may need work. But these might be good opportunities for you to get yourself a property.
2. Just go see the house
You can only know so much without visiting a property. A lot of clients want to ask all these questions about listings before they go see the property and by the time I get answers to those questions, the house is sold. So, if you’re interested in the house again, get out there and see that house. And if you like it, make an offer. And if you don’t, don’t.
3. Love Letters
A lot of times with when we’re making offers, we’re writing a love letter. We’re explaining to the seller of the property why you love the house. People, in many cases, make decisions based on emotion and then justify them later. We’ve done a blog post on this in the past which you can check out for more info. But however you do it, be it with a letter or a video, connect with the seller on an emotional level.
4. Pick a close date that they want
Not all sellers want to be out next week. Some of them have to find a house to buy, right? So, a lot of times we write offers where we say, “Hey, we’re going to close whenever is best for you,” or “In 30 days we’ll close but we’ll rent it back to you for free for three months.” It doesn’t cost you a whole lot of money to be nice and it makes you look better than some of these other offers who didn’t take the time to ask the listing agent what the best scenario would be for the seller. So, ask some questions, figure out how you can address the needs of that seller. Try to connect with them on an emotional level and solve their problems for them in the offer that you write.
5. Put in a penalty for you closing late
If someone really does care about you closing on time, then put in a penalty where, if something goes wrong, the seller gets, say, a hundred dollars a day. This gives them a little safety and calm in regard to their potential fear of you closing late. And if you’ve got a good realtor and a good lender, closing on time shouldn’t be a problem at all. This helps you solve a fear for the seller without, in all likelihood, costing you anything.
6. Know what you’re willing to pay
When a market is as hot as it is right now, you want to offer a price that is as high as you can go. If you really want the property, you don’t want to go in there trying to save three grand. If you do that, you probably won’t get it. Know you you’re willing to pay and go for it.
7. Escalation Clause
Basically, an escalation clause says that if someone offers more than the, say $600,000 you’re offering, you’re going to beat the next highest person by like $5,000. You do this, so you don’t get beat by $1000. Now, there may be like five or six people with escalation clauses, so that’s sometimes something we’ll have to deal with, but having one does help you get a bit of an edge up on people without one.
8. Earnest Money
You can think of earnest money as a sort of security deposit. Now, here’s the situation, sellers cannot cancel on buyers unless the buyers do something wrong. According to the contract, the buyer, however, has lots of outs. They have an inspection period. And if they don’t get a loan, they can cancel. If their appraisal comes in low, they can cancel. The contract is written in favor of the buyers because they’re making a big decision and the sellers’ risk is minimal. If the buyer does in fact, screw up then the seller receives the earnest money, which was previously held by a title company serving as a neutral third part. Typically, it’s 1-2% of the purchase price of the property, but sometimes it’s higher. The seller wants this number to be as high as possible and you want it to be as low as possible.
9. Adjusting the Length of your inspection period
The shorter the time frame, the better for the seller. One way you could make your offer look really, really good is you go, “Hey, I’m just going to waive all the inspections. I don’t even have to do any inspections, right?” Or you get an inspection before you even make an offer. Now that’s a really aggressive strategy and you’d want to think something like that through before offering it. Most people should have some kind of inspection period, but the shorter you can manage the better in terms of getting your offer accepted.
10. Hard Earnest Money
The next item is hard earnest money. This is like the craziest of crazy. This is where you write an offer saying the earnest money is the seller’s whether or not you buy this house. If you buy it, of course, the money is going to go toward the purchase price, but if I don’t, the seller keeps it. This sends the message that you’re confident you’re going to get your loan and that you’re not worried at all about the inspections or the appraisal coming in low. It demonstrates a level of confidence. While this can help you, it is also super high risk because you’re going to lose that money no matter what.
11. Upfront Inspections
If you get your inspections (such as termite inspections and well inspections) done right from the very beginning, you could conceivably remove your inspection period, which might be enticing for the seller.
12. Releasing the earnest money right after the inspection
We already touched on this a bit before. Releasing the earnest money is a nice way to say, “I’m serious about this.” I like this strategy too because again, there’s no real cost. But only do this as long as you’re confident. After your inspection period, the only two outs you really have are your appraisal and your loan.
13. Appraisal Contingency
Now, you might be put in a sticky situation if your appraisal comes in lower than what the seller is asking. If you try to buy a house for a million dollars and your appraiser comes back that it’s worth $900,000, there’s a bit of a problem. See, your loan is based on $900,000 and the seller is unlikely to bring down the price (especially in a hot market) so you’ll likely have to make up the difference. Now, if you’ve got a bunch of money in the bank and you don’t mind putting more money down this easy to overcome, but that’s not always the case for everybody.
One strategy to deal with this is that if you order your appraisal right away and you get it fast enough during your inspection period, you could conceivably wave your appraisal. There are a bunch of nuances around this and different ways to do it, but that’s a great strategy that really can work and helps you take some of the risks from the seller.
14. Force the seller to decide quickly
When we list our properties and we list them on Thursdays and, typically, and we don’t even look at offers till Monday because we want to get as many as possible shoot. Now, this is a great strategy for listing agents, but as a buyer’s agent, it can pose a problem because the buying agents are waiting around for somebody to come up with the best offer. So, one of the things we can do is try to force their hand by saying, “Listen, Ms. Seller, if you accept this offer by let’s say, Friday, I’ll give you an extra five grand.” This can be pretty compelling, and we love this strategy. I think it’s fantastic because it could very likely get you into a spot where you get accepted when they were supposed to wait around until Monday for better offers.
15. Get the buyer to pay the seller’s closing costs
This could involve covering title and escrow fees or even the agent’s commissions. Why I like this is because it directly increases the bottom line of the seller without increasing the price. Now, we’re always worried about if we inflate that price, that the more we inflate it, the greater the danger is that we’re going to have an appraisal issue. So, the way we avoid all that is we say, “Listen, Ms. Seller, I’ll pay $10,000 worth of your closing costs.” That’s just as good for them, and it’s actually a little better for them than raising the price because if they raise the price, they have to pay all the realtors a little bit more money. I think this is a no brainer, but it requires cash. You’re paying this money directly out of your pocket and it’s not going to affect the loan amount.
We hoped this helps you get an offer accepted on your future home. Please feel free to reach out if you’d like for us to deploy any of these strategies for you. We’ll bring out the big cannons and go get you a deal. It’s a lot of fun right now, but it’s also a jungle. It’s a time when the people who are good, are getting deals done.