The market is really heating up and homes are going from listed to pending as soon as you hit refresh on your browser. In Gaithersburg, the average Days on Market for May was 9, with about 1.5 months of supply.
So what does this mean for you as a buyer? Right now it means that competition is tight and that you had better present an impeccable offer when you find the home you want. Below you will find 4 ways to get the upper hand when submitting your offer.
- Be First. Being first can do a number of positive things, but to go first you need to be ready. Have your lender prepare your lender approval letter for the exact amount of your offer. Also, ensure your lender is comprehensive in the approval process—not only checking credit score, but also assets, bank balances, salaries, and expenses. Communication and responsiveness to your agent in this period is crucial. Make sure you’re available to review and sign all necessary documentation as soon as you can. Strategically, a first-in offer also could discourage other interested parties from submitting an offer, as other buyers sometimes aren’t interested in competing or getting in a bidding war for a property. This is no guarantee you’ll get the home, but it puts you in a very strong early position.
- Make A Competitive Offer. People always want to low ball, but in times like these, offering less than the presumed market value will not do you any favors. Make a smart, competitive offer based on comparable sales in the area. Keep in mind, automated estimates from popular websites often do not reflect the market value of a particular property. Work with your agent to find the absolute best comparables for the particular home you’re looking for. Even seemingly small items can greatly impact the market price of a home—things often unseen in online estimates. For example, total square feet of a home has meaning, but so does how the space is utilized. A good view can be literally worth an additional $100,000 (or more) among homes in this area, so keep that in mind. Location also matters. Price differences in the Washington, D.C. region are so hyper-local, that seemingly identical homes just a block or two from one another can be miles apart in price. We can’t emphasize how crucial it is to determine a competitive price for an offer. Have your agent prepare a comprehensive comparative market analysis so you’re fully informed about the best price to offer.
- Make A Big Down Payment. An offer with a higher down payment—especially if it is at or above the 20 percent range—can be very appealing to sellers in competitive situations. A large down payment indicates the buyer has cash on hand to possibly mitigate roadblocks that might emerge during the loan approval process. For example, if a home appraises for less than the contract price, a high down payment can give the seller some peace of mind that an agreement on price still can be reached. It also simply indicates a stronger financial picture for the buyer. A bold earnest money deposit (EMD) can help indicate a buyer’s interest as well. While not the down payment itself, the EMD can indicate a buyer’s seriousness on an offer, and it is applied to home cost at closing. Typically, EMD amounts are about 1 percent or a little more. If you’re a serious committed buyer in a competitive situation, you might want to up that EMD to, say $10,000 on a $500,000 home purchase instead. If you withdraw on a legal contingency, the EMD will be fully refunded, but a higher EMD can indicate you really want the house.
- Include An Escalation Clause. If you’re in a situation where multiple offers are on the table—or there will likely be multiples even though you’re first (see #1)—you might want to include an escalation clause with your contract. It is basically a contract addendum that states the buyer will make incremental increases to the offer price, up to a certain amount. You can still retain your right to appraisal (your lender will require this), inspection, and other contingencies.
There are other things that can sweeten your offer like all cash or no contingencies. Even working with an experienced and organized agent (hint hint) with clean, orderly, and complete offer paperwork can push you over the edge! These tips won’t guarantee that you get the home you are competing for, but these along with a great agent to advise you will certainly help! Get in touch today if you are in the market for your dream home.