In the Roaring Fork Valley, there’s more demand than supply when it comes to real estate. It’s a hot market for sellers, but what does that mean for buyers?
Though it’s a highly competitive time to buy a house, some tips can help your offer get accepted.
Be the first
With so many other buyers looking for homes, it can be tough to be the first person to view a property and submit an offer. Regardless, it helps if you can be. Some sellers aren’t willing to go through a pile of contracts, or they’d instead go with a solid first impression, or a loan offer might sway them while everyone else is still taking tours.
To be in this position, you need a real estate agent with their own connections. Communicate this goal to them, and they will do their best to let you know when opportunities arise, sometimes before homes are ready to go on the market yet.
Offer above asking
Strong offers make the best first impression, which often means going above the asking price. Sometimes it’s only a couple thousand over to show the seller that you are a serious buyer. It’s wise to keep your offer as aligned as possible to the home’s value; a real estate agent will guide you to the correct number.
Pre-underwrite your loan
It used to be that a pre-approval was the most vital financing step for submitting offers. Now, it’s possible in some cases to have your lender pre-underwrite your loan—if the lender offers that service.
Pre-underwriting takes things a step further: it means that the lender will go through the review process before you’re under contract, essentially speeding things up and proving that you’ve got the financials to buy a home. It’s a powerful and creative way to ensure the seller that the loan is pretty much a done deal, just waiting on their decision.
Offer more earnest money
After going under contract, you’ll have a quick deadline to pay your earnest money—a chunk of your down deposit that shows you as an “earnest,” good-faith buyer. Contract contingencies allow the buyer to get their earnest money back if the deal falls apart for specific reasons, such as inspection or financing issues.
On average, an earnest money deposit is around 1-3% of the total purchase price of the house. Adding to your offer that you’re willing to pay more will further show that you’re a serious buyer with the best intentions. You can also take it a step further by removing the contract contingency, but if you back out of the deal, the seller gets to pocket the earnest money.
Remember: if you do offer to put that kind of money down, be sure you’re going to buy the home. Otherwise, that’s a lot of cash to give away.
Paying for a home in cash is highly compelling to the seller, who doesn’t have to worry about lenders and banks interfering with the deal after going under contract. While lending companies must protect their investment by requiring an appraisal or inspection, cash offers aren’t held to those same contingencies.
If you can pay with cash, your offer will be that much more competitive.
Include an appraisal gap clause
With a competitive market, buyers use an appraisal gap as a common tactic, though it comes with its own set of risks.
There are times when a home appraisal values a home lower than its listing price, which causes an issue for the mortgage loan and can cause some deals to fall apart entirely. If a home is listed at $400,000 and goes under contract for $450,000, and the appraised value is at $400,000, the buyer then needs to come up with the $50,000 difference that the lender will not pay for. Many buyers without that cash on hand would back out.
An appraisal gap clause states that the buyer will cover the gap between the contract price and the appraised value. In that example, they’re promising to cover that extra $50k. This is nice for the seller, who has some extra assurance that the sale will go through, but is a risky move for buyers who might pay much more than fair market value and lose money later for reselling.
Submit a clean offer
A “clean” offer is straightforward: it isn’t contingent on the sale of a different property, doesn’t have other financial limitations, and doesn’t include seller concessions (think: asking the seller for help with the closing costs). It also doesn’t ask for the seller to leave behind any of their personal property.
You don’t want to throw away all of your protections as a buyer, but there can be some wiggle room. For example, if the seller provides recent inspection reports from legitimate companies that look alright, you can bargain to forego your own additional inspection with little risk.
Your real estate agent can help you to navigate the cleanliness of your offer—what can sit out versus what should absolutely be included for your protection. Keep it clean and simple.