8 Tips for Making a Strong Offer in a Low Inventory Market in 2023
1. In Low Inventory Market Pre-Approval is a game-changing difference.
Pre-qualification determines how much you can borrow for a home loan. It can be done on the phone with a mortgage broker and doesn’t require verification of employment and assets. The loan officer usually runs a credit check. It helps you figure out your price range quickly and easily. It’s an estimate based on your self-reported financial information. It doesn’t guarantee loan approval. Pre – approval is the next step after pre-qualification. It involves a lender reviewing your financial information, like income statements, W-2s, two-year taxes if self-employed, and assets are all verified. Pre-approval gives you a specific loan amount and mortgage rate. It confirms that you’re approved for a loan up to a certain amount. In a competitive market with low inventory, a Pre-Approval will carry more weight in a West Hartford CT, bidding war when sellers compare competing offers. In a housing shortage, it can be the difference in getting your offer accepted.
2. Present the Seller with a strong offer by going over the asking price.
In the West Hartford, CT market with low inventory, it is important to present your offer as strong as possible. Going over the Sellers’ asking price in this housing market can be a great way to get your offer noticed and hopefully accepted faster before other offers drive the price higher on your dream house. When going over asking in a low inventory real estate market, make sure you factor in closing costs and any other potential expenses that may arise when putting together your over-asking bid for the home run the increase by your lender. Working with an experienced agent who knows the current housing prices is necessary for guidance on how much over asking is needed to craft a winning offer. Presently, in West Hartford, the average winning price over asking is running at 9% West Hartford, CT Housing Crunch
3. Increase your down payment.
When submitting your offer, you increase your chances of impressing a seller in a low inventory market if you are already pre – approved for a loan and can put down a larger earnest money deposit. You demonstrate that you have the financial means to complete the purchase, which is essential, and a larger down payment can indicate just that. Although many low and no-down-payment loan options are available to make homeownership more affordable, adding to your down payment can help your offer stand out in a competitive bidding situation.
4. In Addition to a large down payment, include an appraisal gap clause.
Another great way to show the seller that you are serious about purchasing their home is to include a clause in your offer that will provide an appraisal gap at closing should there be any discrepancy between the listed price and the lender’s appraised value of the home. This clause gives peace of mind to the seller that they will not have to deal with any valuation issues during the transaction and that you are willing and have the financial means to cover any valuation gaps.
5. You can try including an Escalation clause in your offer.
An escalation clause is an addendum to your offer that states how much you are willing to increase your offer in the event of a bidding war. This can be helpful when competing with other offers and allows you to remain competitive while keeping within your budget. The clause should be written in such a way that it automatically triggers if another buyer submits an offer in writing that is higher than yours, for example:
Buyers hereby agree to increase their offer by $____________ over the highest offer received by Sellers from any other buyer(s), but not to exceed a maximum offer of $____________. Seller shall provide Buyer’s agent with satisfactory proof of such competing offers in writing. This type of clause can benefit Buyers and Sellers; However, The Sellers may choose to remove all such clauses if they receive an excessive number of offers with Escalation riders and instead request the submission of the highest and best offer by a specific deadline.
6. Consider being flexible on the closing date to accommodate the seller’s preferences.
Give the seller the ideal closing date that works for them in your offer. Many times, sellers are looking to move quickly, or they may need to extend the closing date, and giving them their desired closing date can help make the transaction smoother and make your offer more desirable to the Sellers. Every situation is different, so check with your real estate agent and see what dates might work best for the Seller. If you can be flexible with the closing date, this can be one of the keys to getting your offer accepted.
7. Consider waiving your property Inspection Contingency.
Waiving property inspections can also be a great way to make your offer stand out from the competition. You could submit an offer with inspections for “informational purposes only,” along with AS IS rider. You are still inspecting the property, and the Seller has informed the Buyer that they will not be repairing any deficiencies found during the inspections. However, this Rider gives the Buyer the option to back out of the deal and get their deposit returned if the Buyers terminate because of unsatisfactory inspection issues. If a Buyer terminates the contract with an AS-IS Rider, they may offer the Seller a chance to continue with the purchase if the Seller provides a credit for any issues found during the inspection. Although the Seller is not obligated to agree, this presents a final opportunity for negotiation. The AS IS rider doesn’t always work when Sellers have received many offers, and several Buyers have dropped the right to inspections. Completely Waiving your inspections can make your offer look more attractive to the Sellers and could be the differentiator in multiple offer situations. This can benefit sellers who do not want the hassle of repairing the property before closing or offering inspection repair credits. It’s crucial to have a thorough discussion with an attorney and fully comprehend the potential risks before deciding to waive inspections. This is not a decision that should be made lightly.
8. Consider a Contingency-Free Offer
Closing a sale comes down to a few key factors: down payment, financing, appraisal, inspections, closing date, and clear title. In a market with low inventory, where Buyers find themselves in multiple offer situations, If you are a Cash Buyer, consider making your offers stand out by ditching some or all of their contingencies. However, it’s important to note that this is a daring move packed with risks. Once you commit, you’re in it to Win It for the long haul, no matter what obstacles or financial hiccups arise. It’s important to seek guidance from your real estate attorney before moving forward with a contingency-free offer.