Making your First Offer your Best Offer is a strategy that may be difficult to understand until you’ve lost a few homes to better offers.
The reality of this real estate market is there just aren’t many homes on the market. As competition from other Home Buyers heats up, different tactics are needed. It’s really not about trying to negotiate the best price; it’s about beating out the competition and buying the home. Instead of stepping up your price with back and forth negotiation finishing at your top dollar – in this environment, you just need to get there faster – in one step, go to your number – Make your First Offer Your Best Offer.
Sales in December were up 22.2% year over year according to the National Association of REALTOR®. The median sales price is $309,800 up 12.9% from the previous year. Inventory for December fell to 1.9 months’ supply down from 3.0 months’ supply in December 2019. (Six months inventory is considered a balanced market).
Things that work in a buyer’s market don’t work in a seller’s market.
The shortage of homes for sale has led to shorter market times and in many cases, multiple offers pushing the sale price above asking. If you’re a Home Buyer in the entry to mid-level price ranges, you may have lost out multiple times to higher offers.
Be a Strategic Home Buyer – If you want to be “in the game” there are few things that are essential.
Unless you’re paying cash and have adequate proof of funds, you need to get pre-approved. Real Estate Agents and financial advisors have been saying this for years, but now it’s critical. There are plenty of benefits for you as the Home Buyer but most important, it shows the Home Seller that you’re a serious Buyer and have taken the extra steps to have a lender run your credit and verify income, expenses, employment, and credit.
When you see a new listing hit the market, in a desired location and price range, you should assume there will be competing offers and you may not get a counter-offer from the seller.
Consider making your highest and best offer first, as if you won’t get a second chance. This can be difficult because we all want to bargain – if you can set that aside and go straight to your number – you’ll be more successful.
Earnest money that accompanies a contract shows the Buyer is acting in good faith. The customary amount in CA is 3%, this may not be enough in a competitive market – consider increasing what might be normal. Talk to your agent about what would make an impression on the seller.
While contingencies will protect your earnest money from specific concerns like inspections, appraisal and loan approval, the seller will look at those contingencies as ways the Buyer can get out of the contract.
If you were to cancel the contract, they’ll need to put their home back on the market and start over, delaying their move and potentially a future sale. When a Seller is looking at multiple offers, they will lean toward accepting the one with the least contingencies, especially, if the prices are comparable.
There are specific time periods in the contract for the Buyer to perform investigations. Here in CA it’s 17 days for inspections and 21 days for Loan and Appraisal. In many cases, shortening some the timelines as much as possible may help the Seller feel more comfortable with your offer. Consult with your Agent to make sure you allow yourself enough time while also making your offer the one the Seller is persuaded to accept.
If you have the flexibility, you might express your willingness to move the closing and/or possession dates to accommodate the Seller’s schedule. This could be an important factor in your favor and can be structured verbally first between your agent to the listing agent, then once you know what the Seller is looking for, make it part of your offer.
Be a Strategic Home Buyer!
These are just a few of the things you should consider as a Home Buyer. Discuss your strategy with your agent before you start looking. If you found your dream home and then start formulating your position, another offer may be accepted before you even make yours. So plan ahead and be Strategic! For more information, download our Buyers Guide.