How To Win A House In A Seller’s Market: A Complete Guide

If you’re shopping in a seller’s market, the home buying process can be more complex. You may have to take additional measures to win the bid. But don’t worry – there are plenty of ways to increase your chances of getting the home. Keep reading for a complete guide on how to win a house in a seller’s market.

Is It Harder To Win In A Seller’s Market?

A seller’s market means there are more buyers than homes up for sale. Compared to a buyer’s market where buyers have more power in their choice of a home, a seller’s market is less ideal for buyers because there’s more competition. This often pushes buyers to be more strategic with their offer. It can even drive up how much they offer.

It’s easy to say you’ll pay more, but as your offer amount goes up, it can get expensive – even unaffordable. This makes it crucial to be prepared before house hunting in a seller’s market. Preparation requires vetting the home to make sure you’re offering the right price, and setting a comfortable budget without exceeding it despite a bidding war.

How To Buy A House In A Seller's Market

There are plenty of methods to stand out amongst multiple offers as you bid for potential homes. Read on for 12 ways to accomplish your goal of buying a house in a seller’s market.

1. Find A Good Agent

It’s crucial that buyers work with a real estate agent or REALTOR^® – a licensed agent – to guide them through the process. Having an agent on your side during a complex transaction can eliminate a lot of stress. They’ll know the ins and outs, down to contingencies and all other components of a purchase offer.

But beyond that, an agent can use their insider knowledge and experience to negotiate on your behalf. To find a good agent, contact Rocket Homes^SM and find a real estate professional in your area.

2. Get Preapproved

It’s critical to get preapproved for a home loan before making an offer. In some cases, sellers will only consider buyers who have a preapproval letter. A mortgage preapproval from your lender shows the seller you have the finances to back up your offer, and shows you’re less likely to experience hiccups throughout the underwriting process. Sellers are more likely to choose an offer from a buyer who’s preapproved than a buyer who isn’t, which can make a big difference in a bidding war.

3. Make Your Offer As Clean As Possible

A clean, no-contingency offer means you’re waiving all contingencies to make your bid more competitive and appealing. A clean offer shouldn’t be contingent on the sale of another property or have other financial constraints.

A clean offer should also be free of seller concessions. These are requests a buyer makes outside of the offer price, such as a request for help paying closing costs. When a seller is receiving numerous bids, a clean offer can help you beat out offers with contingencies.

4. Avoid Asking For Personal Property

Drooling over the sparkly chandelier listed in the exclusions? Don’t ask for it. Want the seller to throw in that cool lawn furniture? Skip it. Your offer could be very similar in price to another offer that isn’t asking for items that belong to the seller. It’s best to simply avoid asking for personal property if you’re serious about a home purchase.

5. Offer Above Asking Price

A seller’s market isn’t the place for making low offers and hoping someone will bite. You’ll have to make your offer strong enough to win a bidding war. If you want the house, you’re likely going to have to go above the asking price.

Don’t be overwhelmed, though. Sometimes an extra $2,000 – $3,000 can get the seller’s attention, but some buyers offer more than that. It’s important to consider your budget and the home’s value before increasing the bid. However, offering any amount over the asking price will show the seller you’re eager to buy the home.

Know that offering slightly above the asking price won’t cost you much more in the long run. Your down payment and monthly mortgage payment will only change significantly if you offer far above the asking price. Keeping your offer aligned with the home’s value, while still going above the asking price, will help you secure the home.

6. Put Down A Larger Earnest Money Deposit (EMD)

Your earnest money deposit (EMD) is proof you’re a good-faith buyer. Usually, the real estate broker will hold onto your EMD and put it in an escrow account. Later on, your EMD can contribute to your down payment and closing costs.

On average, EMDs are about 1% – 3% of the purchase price of the home, but some buyers will give up to 10%. If you put a larger amount down, it may show that you’re a serious buyer and that your intentions are genuine.

But, if you do put more of an EMD down, make sure you intend to buy the home. If you don’t end up moving forward with the purchase, your EMD may be in jeopardy, depending on the conditions you laid out in the purchase agreement. If you sign the contract and then back out of the offer, the seller could have the right to keep your EMD as compensation for the time wasted.

7. Waive The Appraisal Contingency

This is especially important in neighborhoods experiencing a resurgence in property values or gained interest. An appraisal contingency is a condition that makes an offer dependent on the home appraising for as much as or more than your offer amount. Without an appraisal contingency, the buyer is responsible for paying the difference if the appraisal comes back low.

Indicating your intention to bring money to the table if the home doesn’t appraise as high as you expected will almost always set you apart. Just make sure you’re in a strong financial position to take this risk.

8. Make A Larger Down Payment

No matter the type of loan you choose, offering to put more money down is another sign of good faith to your seller. Anytime you can showcase you’re in a strong financial position, you should do so. A larger down payment demonstrates your intent to purchase the home and your capability to meet all financial obligations.

9. Add An Escalation Clause To Your Offer

An escalation clause means your offer will outbid other offers up to a maximum price. In other words, you make an offer saying you’ll pay up to a certain price for a home. If a higher offer comes in, you’ll increase your offer unless it goes past the maximum price you’re willing to pay.

Even if you provide an escalation clause, the seller may choose to counteroffer instead of accepting. The seller may also decide to raise the listing price instead of counteroffering or accepting an escalation clause. If you want to add this clause, your agent can help, but it’s smart to consult a real estate attorney.

10. Make A Cash Offer

In a competitive seller’s market, buying a home with cash can be a smart move. It can make your offer look more appealing to a seller who wants to quickly finalize the deal. A cash offer can also help you avoid the extra fees and interest that come with getting a mortgage loan.

A cash offer proves a buyer is well qualified and has the financial means to expedite closing. Cash offers also allow the buyer to be in control instead of a lender dictating the closing process.

11. Make Sure Your Offer Is Complete

Paying attention to the details of your offer should be a given, but mistakes happen often in this process. These mistakes may include missing disclosures, EMD or pertinent information for the purchase agreement.

In a competitive market, mistakes of this nature may result in your offer getting tossed. This is a crucial step in the process and one that real estate agents know all too well. It can be helpful to have an agent or real estate attorney help you write your best offer and review the paperwork.

12. Offer 1 Month Of Free Occupancy

When buying a home with a mortgage, your payment isn’t due until a month after your closing date. Why not offer your payment early to sweeten the deal? A seller could benefit from you paying “rent” for a month, and this may strengthen your offer.

If you decide to offer 1 month of free occupancy, make sure you discuss all of the details beforehand. It’s wise to have this agreement in writing so guidelines are clear and concise.

The Bottom Line: Make Your Offer Stand Out In A Seller’s Market

There’s a lot to consider when navigating a seller’s market and placing an offer on a home. It’s important to act quickly when you find the perfect house, and ensure your offer stands out. Showing the seller you’re a serious buyer, both in your intention and finances, can make your offer more attractive.

Set yourself up for a winning offer and start the initial mortgage approval process prior to your home search. This helps you understand how much house you can afford, and gives you additional credibility with the seller.