7 Insiders Tactics- How to Pay Less And Still Get Your Offer Accepted

It's no secret, getting your offer accepted in today's hyper competitive real estate market is no simple task. Inventory is low in most areas of the country and the competition for the best homes in the best neighborhoods is fierce. Most buyers you will be competing against (and their Realtors) only know one way to compete, which of course is with price. But like any game, there are rookie tactics and there are insider professional tactics for getting the job done.

Before I share the 7 insider tactics with you, allow me set the stage as to where we are today with the national real estate market.

Real Estate Today

Home prices nationally are up 6.7% over the last 12 months. If you are buying on the West Coast, North East, or any coastal area, chances are prices are up significantly more. This is simple supply and demand. Unemployment is low, wages are increasing, and new jobs are being created, all of which stimulate the demand for new and existing homes. Demand is strong in most areas of the country today.

Supply is short and getting shorter. If you draw a line on the bar graph below from November 2016 to August 2017, you will see a consistent downward trend line representing decreasing inventory of homes nationally. A market in equilibrium between buyers and sellers is generally considered 6 months inventory. Anything over that, the buyer has the negotiating advantage and anything under 6 months inventory usually means the seller is in control and sets the terms of the deal.

Average Days on the Market

Homes are selling quickly, nationally most homes are under contract within 30 days. In some markets, it's days or hours, not weeks or months, for homes to go under contract. These market conditions require you to be all-in if you want to buy a home. You need to be fully pre-approved*, down payment funds ready to roll, actively seeking homes on a daily or weekly. When you find the home you are interested in, tying it up with an offer quickly, then performing a thorough inspection and due diligence is often the only way to get the best homes in the best neighborhoods.

7 tactics to get your offer accepted and pay less

This brings us to our 7 tactics to get your offer accepted and pay less than the competition. These are the tactics we are seeing top Realtors from across the country employ in order to consistently get their clients the home they really want.

1. Tight deadlines- 7 to 10 day physical inspection, financing & appraisal deadlines, typically closing within 14 to 21 days depending on the level of competition for the property. In order to make this happen, I recommend all credit, income, and assets are verified and reviewed by an underwriter before making an offer. We call this a Credit and Income Approval.

2. Coordinated effort between the Realtor and the loan officer- As soon as the offer is sent, the loan officer starts texting the listing agent, schedules a call and explains the level of financing due diligence already performed and how it is possible to close so quickly. The loan officer's job is to help sell the financing and ensure the listing agent is comfortable recommending your offer above all others to their seller.

If you can do better than this, your offer has a significant advantage!

3. Strong purchase agreement/offer- Showing the maximum amount of potential down payment available and considerable earnest money communicates strength and certainty that you can and will perform.

4. Be prepared to pay over the appraised value- It is not uncommon for appraisals to come in below the purchase price. This does not mean you are not getting a fair price on the home. Appraisals look at comparable homes that have sold over the previous 90 to 180 days to arrive at a comparative market analysis of value. If you are buying a home in June and one or two of the comparable sales sold in January or March, it is easy to see the market has likely moved higher. Appraisals do not account for future appreciation or market movement from the date of the previous sales. Thus appraisals that are 1 to 3% below the negotiated price of the home are typical in markets where the supply of homes is less than 6 months.

5. Create a contingency plan for a low appraisal before making an offer- If you know going in to an offer there is a chance the market has moved upwards quickly, plan accordingly with your Realtor and loan officer. Create a financing plan to deal with that situation, which could include a higher loan to value loan option, potential for additional down payment or gift funds, maybe even adding a small second mortgage to make up for the difference.

6. Write offers that highlight your willingness to pay over appraisal- A seller's greatest fear is that you are going to tie up their home for 30 days and then cancel. Addressing those fears up front provides a higher likelihood they will take your offer over other offers, even if the other offers are

higher than yours. The addenda would say something like; "buyer hereby offers to pay $1k higher than the highest competing offer on subject property, not to exceed appraised value by more than $10k".

7. Close fast and move slowly- This is really getting aggressive but potentially solves a significant problem for the seller. Once they sell their home, they often need to find a new home, which can be difficult and stressful for them. The offer would have a built inrent back agreement, allowing the seller to get their funds from the sale (your purchase) in 14 to 21 days, but giving them up to 59 days rent back. In some cases I've seen buyers waive charging the seller for the rent back. This is perceived by the seller as a significant sign of good will and can be a secret weapon when you know you are in a multiple offer situation.

BONUS TACTIC #8-

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*The Home Scouting Report® (HSR) is a free home finding service provided directly to you as a homebuyer by HBM2, a licensed real estate brokerage services company. The Loan Officer's role is to assist in determining a comfortable home price range for HBM2 to use when it is searching for property listings within your search criteria. The Loan Officer is neither an employee of HBM2, nor the provider of the HSR.

**Pre-approval is based on a preliminary review of credit information provided to Fairway Independent Mortgage Corporation which has not been reviewed by Underwriting. Final loan approval is subject to a full Underwriting review of support documentation including, but not limited to, applicants' creditworthiness, assets, income information, and a satisfactory appraisal. The information contained in the article has not been prepared by Fairway Independent Mortgage Corporation and is distributed for educational purposes only. The information is not guaranteed to be accurate and may not entirely represent the opinions of Fairway Independent Mortgage Corporation. Copyright©2019 Fairway Independent Mortgage Corporation. NMLS#2289. 4750 S. Biltmore Lane, Madison, WI 53718, 1-866-912-4800. Other restrictions and limitations may apply. All rights reserved.

Jon Linnett

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