Standing out in a seller's market
You have found the perfect home and decided to take the plunge and purchase it. It includes everything you need, and you are more than willing to pay the listing price. This should be smooth sailing, right?
Purchasing a home can be challenging enough, but trying to buy a house in this escalated seller's market can seem like a hopeless situation.
Fortunately, there are ways buyers can stand out in this red-hot market.
1. Cover Your Closing Costs
It is common for sellers to cover a portion of the buyer's closing in a buyer's market. Since we are currently in a seller's market, there is little to no chance of a seller accepting your offer if you ask them to cover closing costs.
2. Include An Escalation Clause
An escalation clause also referred to as an escalator, is included in a purchase offer. It states what the buyer is willing to pay for the home. If the seller receives a higher bid, an escalation clause allows you to increase your offer to stay competitive.
3. Offer a Leaseback
A leaseback, also called a sale-and-leaseback, authorizes a buyer to rent their newly purchased property back to the seller for a certain amount of time.
Usually, a seller will request a leaseback from just a couple of weeks up to a couple of months.
Offering a leaseback is a powerful tool in this hot seller's market. Buyers are alleviating the seller of the stress of quickly getting situated into their new home. A leaseback is an excellent way for buyers to stand out in this market.
4. Cash Rules
A cash buy may not be possible; however, it's a route you should investigate if it is a possibility.
Mortgage approval and the countless documents required with that process take a long time to sift through and approve.
The faster the sale, the happier the seller.
Impatient sellers eager to sell their home will more than likely take an all-cash offer above other offers.
5. Increase Earnest Money
Earnest money represents how much skin in the game buyers have.
Typically, the earnest money is 1% - 2% of the purchase price. To show how serious you are about the sale, increase your earnest money deposit closer to 4% of the purchase price.
Earnest money comes from your down payment and is fully refundable if your financing doesn't come through or the inspection is unsuccessful.
Money talks; offers with a more sizable earnest money deposit have a greater chance of being accepted in today's competitive market.
6. Obtain Appraisal Gap Coverage
In a seller's market, you will likely pay over the list price for a home.
When you pay more than the house has appraised, you will have problems with your lending institution. During this time of stress is when gap appraisal comes in handy.
For example, if a home lists at $400,000 and you enter into the contract at $420,00, but the appraisal only comes in at $410,000, it is your responsibility to find those extra funds. Purchasing appraisal gap coverage makes up for the difference in the appraisal and contract price.
Buyers Have to Sweeten the Deal During a Seller's Market
Purchasing a house can be challenging enough, but buying a home in a red-hot seller's market can be nerve-racking.
With homes selling for over listing price just hours after they've listed on the market, buyers have to find creative ways to sweeten the deal.
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