Despite all the challenges we have faced so far in 2020, the DMV's real estate market has held tight and continues to move along quickly. Low inventory of homes remains an issue in the region (and nationally) for years, with no sign of changing in the foreseeable future. As restrictions ease and more folks get back out into the market, we expect to see "spring market" conditions push into the summer, and that (along with low inventory) will mean multiple offer situations for buyers. If you are thinking about making a purchase, there are several strategies to consider when facing an offer deadline. Here's how you can best position yourself to win in a competitive situation:
Work with an Experienced Agent
Every situation, every client, and every seller are all different and have different options available to them as well as different options they would be comfortable using. Working with an agent who has been through many of these transactions and thoroughly understands your objectives is critical to getting the best advice possible. Make sure your agent can take you through all of the possible strategies and clearly convey the risks and benefits of each one.
Use a Local Lender
Big banks and online mortgage brokers in particular are not viewed favorably by most listing agents. They have a reputation of over-promising and under-delivering and tend to be more bureaucratic overall, which can lead to costly glitches and delays. Local lenders have a stronger industry reputation partially because they ONLY do mortgages and handle all steps of the mortgage process in-house. They are not interested in selling you on other banking products. And most importantly, they also are responsive after regular business hours, so can respond on nights and weekends when it's usually most crucial in time-sensitive situations.
Include An Escalation Clause
Of course, offering more money to purchase the home can always help. In an escalation clause, you agree to raise your price by a set amount over the next best offer. You can set a max sales price to protect you from paying more than you are comfortable with doing and avoid a bidding war.
Be Flexible on Terms/Contingencies
Your agent should find out whether the sellers need/prefer any special terms, such as a quick closing, a rent-back, or a home of choice contingency. You also may be able to employ competitive options such as waiving certain contingencies by doing pre-offer inspections and/or getting an appraisal waiver from your local lender.
Put More Money Down
As they say, cash is king. If someone is offering all cash, that certainly helps their offer since the seller won’t have to worry about financing issues. If that is not an option for you, putting down 20%-50% (or more) will demonstrate your financial strength as a buyer and instill greater confidence with the seller.
Larger Earnest Money Deposit
The EMD (or "Good Faith Deposit") is typically held by the settlement company while you are under contract and reflects your commitment to the deal overall and how much you want to purchase the home. Even if you are using a 0% down loan program, you can still put down a sizable EMD to let the seller know you are serious and that you do have funds available if it were ever needed.
Finally, stay positive. When we know an offer situation is going to be competitive, we will always advise our clients on what the strongest reasonable offer is to make. There can always be another party out there willing to do things that are beyond reasonable and that is what it is. If you miss out on one house because someone else was willing to take things further than you were comfortable with, then that's just one less person to compete with on the next one. So keep your head up--we will help you push forward and find the right one!