Housing markets across the country have exploded in the past year and there's no slowdown as the market hits the busy spring homebuying season.
Even with the end of the global pandemic possibly in sight by mid-2021, the competition to buy homes continues to be intense, mostly because of a persistent lack of inventory.
The 5.64 million sales of existing homes in 2020 were the most since 2006, according to the National Association of Realtors (NAR), but preliminary numbers indicate February inventory dropped 48.6% year-over-year, eclipsing January’s dramatic 42.6% drop.
At 1.9 months, the supply of unsold homes matches the lowest level since NAR began tracking the number in 1982. A six-month supply is considered healthy. There are still thousands of would-be buyers having trouble finding homes that meet their needs, especially first-timers without any home equity to leverage a purchase.
That means more competition, and more competition means buyers are almost certain to face a bidding war. Rejection is sometimes unavoidable, but there are a few things you can do to improve your chances.
Start with a pre-approval letter from your trusted Bay Equity Loan Officer to let sellers know you’re serious. A pre-approval letter shows you’ve been financially vetted and have the wherewithal to get a deal done.
Pre-approval doesn’t just give you a better shot at the competition – it can also help you stay true to a budget. By having your finances examined by professionals, you get a better idea of how much you can realistically borrow.
Be flexible. Sellers often prefer buyers who accommodate their needs. Offer to meet their closing date. Or maybe offer a rent back or request minimal repairs.
Other bidding war strategies could include waiving contingencies, paying in cash or setting up an escalator clause with your buying agent to match or exceed better offers. Making an offer sight-unseen is the new normal in today's marketplace.
If you’re worried about over-extending your budget a little, remember that most buyers (40%), and especially first-time buyers (60%), increasingly get “a little help,” with the initial down payment, whether that’s a down payment assistance (DPA) program or gifts from friends and/or family. With today’s low interest rates, you may make up the difference in the long run.
Offering a little more can give you a leg up on cash buyers, too. They are often investors and just want to get the property as inexpensively as possible to maximize their margins.
Last but not least, you can try reaching out. Take the time to understand the seller's situation. Attach a cover letter letting them know about your personal feelings for the home. About 40% of successful bids include a cover letter. Don’t be afraid to knock on the door. Just be respectful.
Choose a real estate agent who can obtain some of this information on your behalf. Bay Equity can refer you to local agents.
Don’t let this persistent low inventory sap your home shopping strength. If your home offer gets dismissed, don’t be too disappointed. It’s a sellers’ market. Learn from the experience and come back with a stronger offer next time.