The current housing market is so competitive that the pressures associated with it can cause buyer burnout – which leads prospective future first-time homeowners or those looking to move to stop looking and give up hope. In the below article I address buyer burnout and some practical steps to help ensure you get the home you want.
Finding the Right Realtor
A major mistake I often see buyers make is to not take sufficient time to research and find the right realtor. The buyer must be diligent in researching realtors in the area in which they want to buy. A realtor with the most listings in the area is a clear sign of ambition and also knowledge about prevailing forces in the marketplace. A strong realtor will help you avoid the pitfalls of the bidding process, inspections and help you understand your rights, duties and legal obligations during the home buying process. I also recommend looking for online reviews that show client experiences. A buyer should take the time to read good and bad reviews to determine if the realtor is right for them. Interviewing the realtor and their agency is also a good idea to see if they are a good fit. A realtor can make or break the home buying experience so it is important to do your research to find the best agent.
Additional items to consider:
- Is the realtor established or just starting out in their market (complacent but experienced vs. hungry)
- Ask for references from the agent and call the buyers or sellers that the agent has represented
- Check with the local regulatory board to confirm the realtor’s status
Presenting a Strong Offer
Once you’ve selected a realtor, you should conduct research on the targeted area to determine the value of the property to make an intelligent offer, but the research shouldn’t stop there. The buyer and realtor can also research private and public records of real estate listings to try and find an edge over the buyer’s competition. Findings in the public records, such as IRS liens, code violations, the time the property has been on the market can give the buyer an edge when presenting an offer to buy the property.
There are a number of other available points of leverage in an offer you may consider with your realtor. If they are experienced, they should be able to work with you to build a package that is enticing for a seller.
Topics to discuss:
- The length of all contingency periods
- Waiving of appraisals
- Pre-approval letters from your lender
- Working with a company for an “all cash offer”
- Escalation addendums
Escalation Addendums
Prior to submitting an offer, and in this real estate market, you may want to include an escalation addendum. This is an addendum to the contract that states that if someone else makes an offer, the buyer will match the competitors offer and add the specified escalation amount on top of the competitor’s offer to beat out the price. The addendum also lists a maximum price you would be willing to meet. The maximum price is important because the seller must know what the buyer’s maximum price is that they are willing to pay to match and beat a subsequent offer. The maximum price includes the escalation amount. If someone bids higher than a buyer’s maximum price, they will lose the bid on the house.
While the competition submits offers and tries to negotiate down for a property, a buyer that adds an escalation addendum creates an advantage to the seller to make more money which in turn makes the buyer’s offer more attractive. Although an escalation addendum is not a guarantee that a buyer will ultimately close on the property, it is a great strategy to make a buyer’s offer stand out from the rest in a highly competitive, cut-throat market.
Understanding and Waiving Common Purchase Contingencies
Contingent on Buyer Selling Current Home
This is straightforward. You, the buyer, need to sell your current home in order for this contingency to be removed from your offer on the Seller’s home. Most sellers will not accept this without a 72 hour “Kick Out” clause meaning if another buyer makes an offer to the seller, you must remove the contingency. This means you need to have enough money to either finance both homes or pay cash. If you cannot use either option, you will lose the bid and your earnest money will be returned.
Financing
This contingency is dependent on you financing the property through some means, traditionally a mortgage. Having a pre-approval letter is helpful, but there are other ways your bank can help you get an even stronger approval such as an Underwritten Approval Letter that tells the seller you are already approved for financing of a particular amount.
Home Inspection
When you make an offer on a property, you may waive your home inspection. While this will make your offer more enticing for a seller, you are also opening yourself up to buying the home literally, “as is.” You don’t have the right to back out based on items found in the inspection.
Appraisal
Usually this is required by the lender in order to determine the market value of the property as it relates to the amount of money the lender is willing to finance. It is an effective hedge against risk on behalf of the lender. If the appraisal meets or exceeds your offer price on the home, congratulations! If the appraisal comes in lower than your offer, you will not be approved for the amount of the loan you requested and you may rescind the contract and obtain a refund of your deposit or you may attempt to renegotiate the price with the seller.
If you waive your right to an appraisal, your offer is stronger. The downside is if the appraisal comes in low, you may forfeit your deposit if you cannot close or you will have to come up with the amount of cash to cover the gap between what the lender will finance and the offer price. If you decide that the difference between the appraisal and the offer is too large for you to cover with cash, you will be in breach of your agreement and at a minimum lose your deposit.
Prevent Burn Out By Knowing your Rights
Never let your agent push you into a home that you are uncomfortable with. Further, you must understand the additional closing costs which may be two to three percent of the purchase price.
I highly recommend retaining the services of a well seasoned real estate attorney to provide assistance navigating a purchase agreement. Most real estate agents are not well versed in specific aspects of Florida law that protect you from a seller’s negotiation tactics and erroneous disclosures. Remember, an accepted offer is binding which makes you committed to the purchase.
Call us now at 1-561-353-2800 or contact us online for a free 30-minute consultation. We have over 25 years of experience and can assist you with your real estate matter for the best possible outcome.
