As most people who own a home, or are looking for a home know, the real estate market around the country and in Tampa Bay continues to change. It is no secret that inventory is decreasing and prices are increasing. I was recently involved in a deal that had seven offers in two days! In this strong Sellers Market, you need to be smart as you try to buy a new home.
The first step is to do your homework. A seasoned local Real Estate Agent is a fantastic resource in this first phase. With his/her help, you can:
-personally view homes that fit your needs
-determine the market value for homes that interest you
-make a smart offer to increase the chances of making the home yours
A few years ago, the pressure was on the seller to find a way to sell their home. At that time inventory was high and prices were decreasing. These days, the pressure is on the buyer to make an offer that is compelling to the seller.
Your offer needs to stand out.
This will outline a framework for making your offer, and suggestions on how to make your offer to purchase as strong as possible.
The price is obviously the most important component of an offer, for both the seller and the buyer. Both sides want the best deal, for them. As a buyer, you need to have a good handle on what the “value” of the home is, based on how the subject house compares to recent sales in the area. You will need to take into account multiple factors, including: square foot price, age of roof, condition of AC, lot size, landscaping, interior upgrades, flooring, etc. All of this is relative to the condition of the recent sales. In the current marketplace, we are seeing more and more homes sell at or above list price. The days of getting a great “deal” or a “steal,” or a price significantly below market value are over. On a cautionary note, the home must appraise at or above the purchase price in order to get financing. Overall, buyers are walking a fine line between getting the offers accepted, and potentially submitting an offer price which may exceed the appraisal.
Earnest Money/Good Faith Deposit
You want to illustrate to the seller your strong interest in the home. The higher the deposit, the stronger your offer will look. A seller will look much more favorable at an offer with a $10,000 deposit versus one with a $2,000 deposit.
I encourage all of my buyers to have a professional inspection, which is standard in all contracts. You can improve your offer by shortening the inspections time period, to maybe 5-7 days, which may make your offer stand out compared to a buyer asking for a 15 day inspection period.
You have heard it before, Cash is still King. A cash offer will greatly increase your chances of being the successful buyer on the home. If you are making a cash offer, submit proof of fund with the offer, don’t hold out while the negotiations proceed. Also, many more things can go wrong in a deal which is contingent on financing. If you do plan to finance, a clearly written pre-approval letter from your lender is an absolute must at the time of the offer. Also, the more cash you put into the offer the better.
The quicker you can close, the more the seller will appreciate your offer. In a cash deal, you can close in a matter of days. For financing, you will probably need at least 30-45 days.
The more contingencies you put in your offer, the less likely the seller will chose it. Contingencies such as the sale of a buyers home, high repair limits, asking for a home warranty, buyer closing costs paid by seller will cloud the waters and make your offer less desirable. Keep the offer clean.
A relatively new occurrence is to provide an offer letter. This tells the seller a little bit about you. For instance, the letter may say who will be living in the house, maybe your occupation, and tell them why you want this house. This is all designed to make a positive connection with the seller, which just may be the way to a winning offer.
The purchase of a home is one of the most important financial decisions you can make, contact a local real estate professional help you in this process.