This year is quickly ramping up to be a big one for the seller’s market in the world of real estate, and it can be tricky sticking the landing when you’re one of the buyers. Let’s hit the listings and show the seller of your dream home that you mean business with these 5 ways to compete when buying a Salt Lake home in a seller’s market.
Before you put a bid in, it pays off to get your home buying finances in order by getting pre-approved with your chosen mortgage lender.
Once you’re pre-approved for your home loan, your lender will provide you with a pre-approval letter that you can then show to the seller along with proof of funds. Taking the time to get your ducks in a row shows you’re serious and paying attention to the details in order to make this real estate transaction a success for both you and the seller.
This immediately puts you head and shoulders above a disorganized buyer who could jeopardize the entire deal with an uncritical eye and unknown prospects.
Make an Impression
With your proof of funds available to the seller, you want to come out of the gate clearly showing your sincere intention to purchase their property.
A great way to accomplish this is to put in an offer that includes putting down earnest money coupled with a sizable down payment. When putting down earnest money, expect to commit 1 to 3% of your offer price. Additionally, you want your down payment to equal at least 20% of your offer price.
Another reason to aim for that 20% threshold with your down payment is to avoid paying more on your monthly mortgage payments in the form of private mortgage insurance, or PMI.
Choose Your Contingencies Wisely
When putting in your offer, you will have the opportunity to include any contingencies on which the transaction depends.
These regularly include a home inspection and appraisal, two things that are almost always required by a major mortgage lender. However, you will also be able to list any repairs, adjustments, or requests for items as contingencies.
Since you are putting in a bid in a market that is heavily in favor of the seller having their choice of buyer, we strongly recommend either foregoing these optional contingencies or at least keeping them light.
A seller that receives an offer laden with expensive repair contingencies is likely to decline the offer.
Add a Personal Touch
If you find yourself really wanting to purchase a particular property, you can consider writing a personal letter to the seller.
In the letter, include your motivation for purchasing the property, and feel free to list some of the attributes that have you excited about the possibility of purchasing it. This may seem a little old-fashioned, but it can have a major impact on a seller looking for something that separates one buyer from the rest of the pack.
Keep a Cool Head
Finally, you may find yourself in a bidding war at some point in time, especially since a seller’s market puts all the power in the seller’s hands.
The best thing to do in this situation is to tread carefully and be honest with yourself. Don’t just continue increasing your bid out of a misled sense of pride, and know your financial limits.
Walking away from a bidding war is nothing to be embarrassed about, and could end up with you finding a much better deal later on.
Another thing to keep in mind is that if a buyer puts in a high bid that ends up substantially larger than the appraised value of the home, the buyer’s lender may deny the loan entirely or make the approval of the loan contingent on the buyer paying the difference.