How to win at buying houses in a hot market

Even if you don't have heaps of cash to throw at sellers!

  • 5 mins read
  • July 1, 2019

It seems like these days, it’s become cliché to talk about how “hot” the market is. But what does “hot” really mean, relative to you and your needs?

It is certainly is a very active market. Time on market is very low, multiple offers are typical, and it’s not uncommon for homes to sell above their listing prices. This is primarily due to supply and demand: more people moving into our part of the Northwest paired with scarce housing inventory relative to that demand. Sellers on average are doing well, especially if they price their homes accurately and have them competently marketed.

So where do buyers fit into all of this?

Contrary to what you might assume, not every purchase transaction is a furious multi-offer bidding war. There are many examples of situations where even in today’s tight market, buyers have equal or even superior leverage compared to sellers.

Sellers often over-price their properties, leading to longer days on market and lessening their advantage. There are many price segments or even entire neighborhoods that are currently buyer’s markets or balanced markets, like Anderson Island or rural areas like Eatonville for example. Properties with challenged condition like weird architecture or obviously deferred maintenance have smaller buying pools, meaning buyers have more power.

Luxury properties have, historically, almost always been a buyer’s market. Distressed sales like short sales, bank -owned sales, or even homes at risk of foreclosure typically are priced at a discount. And of course, buyers who make contingent offers (meaning their current home has to sell before they can close on their new home) are typically very motivated sellers. It all varies! There are no cookie cutter real estate formulas.

That being said, there are a few general principles that can help you be successful in nearly every scenario:

  • Get an underwriter’s pre-approval. This is huge, and so under-utilized. It’s fairly common knowledge that a seller will only take your offer seriously if you include an attached letter from your lender proving that you are pre-approved for a home loan. What many people don’t know is you can go a step beyond this. If you have a good lender, you can actually submit your loan application to the loan underwriter prior to even making an offer. An underwriter pre-approval means you are bringing certainty and seriousness to the table, and it will differentiate you from other buyers. It also typically means you can close faster; most sellers like this a lot.
  • Have an agent who will talk to the other agent! You’d be surprised at the nuances you can pick up from an actual human conversation over the phone. When I make offers, I always speak with the listing agent first and ask them point blank: “what’s most important to your seller?” In many cases, sellers want to move quickly, and for top dollar. But in some cases sellers prefer patience and a slow timeline – maybe even a temporary rent-back agreement. Sometimes they will be reluctant to take an outrageously high offer if they’re not sure the appraiser will sign off on it. And many more subtleties! Having that initial conversation arms you with the knowledge of what it takes to succeed.
  • Mind your terms. Offering the right price gets your foot in the door. But it’s contract terms that differentiate you and make you stand apart from the competition. “Terms” can include many items, including the closing date; how long the inspection will take (or perhaps you pre-inspect before even making your offer); offering extra cash if the house appraises low; offering a higher price if there are competing offers; whether to ask the seller for any repairs, etc. The list goes on. As stated above, this is something that you should derive from your agent’s conversation with the other agent. Why not make an offer precisely targeted to the seller’s priorities?
  • Have a team ready to go. It’s good if your agent has an open line of communication to the listing agent. It’s even better if your lender is ready and willing to call the listing agent, speaking to how stable your finances are and how motivated you are. Or if your agent has an inspector already queued up for the next couple days to get the inspection taken care of immediately after the seller accepts your contract. “Love letters” from the buyer to the seller are risky, and can spectacularly backfire. It’s far better to just have a professional cadre lined up, and to woo the seller with your seriousness and professionalism instead.
  • Hire an agent with a strong reputation. I have literally had offers accepted because of how the listing agent thought of me, the buyer’s agent. One of those offers competed against several others, and was $20,000 less than the highest competing offer; we still got our offer accepted. Working with a Realtor® who is highly regarded by his or her peers can be that final nudge you need to win in a competitive situation.

Curious about your chances in today’s market, or simply interested in learning more? Click here to estimate how much your monthly payment might be on a house you see. And if you’re further interested, you can reach out to a reputable mortgage lender to find out how much house you can afford. Happy house hunting!