In the Washington area’s hot real estate market, a new listing sells in a median of only 15 days, according to the latest statistics from MRIS subsidiary RealEstate Business Intelligence.
That quick turnaround illustrates the fierce competition a buyer can expect when seeking a dream home.
Here are some tips to help you gain some advantage in a bidding situation:
- Work with an agent who is a good negotiator, not just someone who can write the offer. A good negotiator will try to get information from the listing agent on what terms are most important to the seller. This allows the potential buyer to construct an offer most suitable to the seller’s needs/wants.
- Ask the agent to be present during the presentation of the offer to the seller(s). Being present provides the agent an opportunity to look for options to modify the offer in ways which satisfy the seller’s needs and still fit within the scope of the buyer’s objectives. Without this personal interaction, counter-offers can get out of control as both sides vie for position.
- Don’t ask for things in the offer which don’t convey. Things like lawn mowers, swing sets, area rugs, etc., don’t belong in a competitive offer. These can be requested and negotiated once you’re the prime contract.
- Keep your offer simple. Don’t complicate it with trivial items like requesting a faucet drip or a running toilet be fixed. In most cases, these will be covered in the buyers’ right to a final inspection of the property, unless this has been negotiated out of the contract by the seller.
- If the buyer has significant cash reserves, consider waiving the appraisal contingency. In other words, if you are making a 20 percent down payment and still have 20 percent more cash left in the bank after settlement, you can waive the appraisal and agree to pay cash over the appraised value up to a certain limit over the appraisal. Obviously, if you’re using all your available cash for the initial down payment, you can’t do this.
- Place a large earnest money deposit. Money talks and shows a serious buyer. Consider making it non-refundable and perhaps payable directly to the seller upon acceptance of the offer. The buyer must be comfortable in this decision, and it’s encouraged to discuss first with the buying agent.
- If financing is needed, conventional loans are preferable to sellers and listing agents over FHA or VA loans. If a buyer needs FHA or VA financing, the strongest offer needs to be introduced right away.
- The buyer should have their loan officer call the listing agent/seller to vouch for the capability to obtain the financing.
- The buyer should ask their lender if the lender will pay part of your closing costs. This is common in today’s financing market. This could save the buyer cash and allow use of that money to enhance the seller’s net proceeds.
- Offer to be pre-approved by the seller’s/listing agent’s preferred lender. The buyer doesn’t have to use this lender; however, getting confirmation of the ability to finance the purchase could set a potential buyer apart from other offers, and put the seller’s mind at ease.
- Offer to pay some/all of the seller’s closing costs (if allowed by the lender).
This is not a market which potential buyers want to navigate without the best counsel one can obtain. Having a great team with you – company, agent, loan officer, home inspector, title company, warranty company, etc. – is the best place to start.
Valentino is president of Coldwell Banker Residential Brokerage in the Greater Washington, D.C. Metro, and is a 30-year real estate veteran.