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A seller's market occurs when there are more home buyers in the real estate market than there are eligible homes for sale, complicating everything when you are trying to put a winning offer on your dream home. In metro Atlanta, throughout 2020, many homes saw multiple offers within 24 hours of the property hitting the market, with this trend predicted to stay steady in the new year.
If you are searching for your dream home and want to be able to move fast and beat out the competition when you find it, it is crucial to act early and be prepared to walk through the following steps.
Have Pre-Approval and Proof of Funds Ready
Before putting an offer down on a home, start working through the pre-approval process for a mortgage with a financial lender so that you will be able to present proof of funds when it's time to start home shopping. In a seller's market, offers move quickly, leaving no time to try and secure funding last minute.
If this is the stage you are in when it comes to the home buying process, consider diving into our blog on Mortgages 101 to get started. Once you are pre-approved, you can submit a pre-approval letter with your initial offer.
Lower Your Contingencies
When it is time to present your offer, try to keep contingencies minimal. A contingency is a clause placed in the contract that must be met before it can go "binding", meaning that both the buyer and seller have agreed to these terms and are ready to proceed with the sale of the home. Contingencies can include details like time frames, the final walkthrough date, and costs or fees that the seller or buyer should cover.
An offer becomes more tantalizing when it is as friendly as possible to the seller, such as agreeing to their closing date, allowing a "right to cure" in the home inspection process, or removing contingencies about the sale of your own home before purchase.
Shoot For a Larger Earnest Money Deposit
Earnest Money Deposit's (EDM) is the amount that you put down on a home to show that you are a serious buyer-usually 1 to 3% of the sales price of the home. This amount covers any costs that might be incurred to the seller if the buyer backs out of the offer, applied towards the buyer's closing costs if all goes smoothly. To make your offer more appealing, consider offering a larger EDM, but ensure that you are serious about buying the home or this amount may be compromised.
Offer to Expedite the Timeline
Selling a home can be a major life disruptor, and most seller's want to get the process completed as quickly as possible. Be flexible with the closing date, and try to work on the timeline of the seller, even offering to give them their ideal occupancy time to move or seeking to expedite the inspection process to meet their schedule. The seller may opt to go with your offer just because it is most convenient if they have major time constraints, such as trying to move quickly for a new job.
Include an Escalation Clause
An escalation clause is applicable only if there are other offers on the home and you are willing to try and outbid them. This clause states that if another bid goes higher than yours, you will raise your bid automatically. It is important to set reasonable boundaries for how much you are willing to pay on the home, and speak with a lawyer who has to write this clause into the contract.
Keep it Heartfelt
When a seller has multiple, similar offers on the table, sometimes writing a personal letter can make yours stand out. Introduce yourself, explain what you love about the house, and why you would love to make it your forever home. For a sentimental seller who has resided in the home for a long time, this gesture can make a huge difference in showing that the home will be well-taken care of by a new family looking to make memories there.