How to Improve the Buyer's Position in a Seller’s Market
There is no question that we are still in a Seller’s market. The lack of inventory continues to frustrate buyers. If you have a buyer and they are tempted to give up looking for a home, I have a little good news for you. The January 2020 Denver Metro housing market statistics from REcolorado show sales are 9% higher than last year. Sellers did their part by bringing 4,989 new listings of homes for sale to the market, a year-over-year increase of 2%.
Obviously that is not enough to get us into a balanced state so what can a buyer do to improve their chances of getting their offer accepted in this competitive market? Below are some tactics to use during the search and offer process.
When looking for a home:
1. Have a pre-approval not a pre-qualification from a quality lender. A pre-approval means the lender is indicating that based on the info the buyer provided, they look to be qualified. Any new information obtained during the pre-approval process could change this. With a pre-qualification letter, the lender has taken the next steps and verified the income and asset information provided by the buyer. This will significantly cut down the loan time frame and reduce the possibility of the loan falling through. The Seller will see the Buyer's offer as stronger than those with a pre-qualification letter.
2. Buyers should have as much cash available as they can manage so they can make their highest and best offer when they are ready to submit an offer. They may not get a chance to negotiate. This is not possible for some people but if they do have assets they can use, it will improve their offer. If they don’t have the cash available they might be able to use their 401k. A lender I work with has a program where you can pay for the downpayment with cash from your 401k and then they will concurrently give you a loan at the close that will pay back the 401k money.
3. The real estate agent should contact homeowners in the buyer's preferred neighborhood. You never know when you may approach a seller that hadn't thought of selling but is attracted to the idea of having a ready-made buyer that wants to live in their neighborhood. The real estate agent can also contact expired and withdrawn listings.
4. If the Buyer has a home to sell, get it under contract before the Buyer makes an offer. Like it or not, Sellers see a home contingency as a negative. They fear that if they have to wait for the buyer's home to sell then it may cause problems for the closing on their transaction.
5. Consider delaying the home search until September. Prices and competition for homes start to drop off as kids go back to school and people start thinking about the holidays. There won’t be as much inventory either but the Buyer won’t have to go up against 20 other buyers if they find the home you want.
6. When making an offer, the agent might consider using one or more of the following in the contract:
Agree to make earnest money “hard” after a certain date such as after the inspection.
Agree to either waive the inspection or agree to require no inspection requirements
Do you have some tips for helping your buyers that have worked for you?