Today's housing market is as competitive as ever, and it's showing no signs of changing anytime soon. With the average house for sale in Chicago only sitting on the market for 21 days, it's getting harder and harder to find the right home and, more importantly, win the bidding war.
That means that now, more than ever, it's important to make a strong offer in order to snag a house. So if you're looking to purchase a home in 2022, check out these tips for making your offer competitive in this tight seller's market...
Pre-Approval Is Key
Gone are the days of pre-approval being an option. With sellers typically receiving multiple offers right out the gate, they won't take yours seriously if it doesn't come with a pre-approval letter from your lender. With a pre-approval letter, you're guaranteeing the sellers that you've already secured funding, and therefore it's unlikely that funding issues will arise later in the closing process. Some lenders are even offering conditional approval programs which means they underwrite you first so you can strike out the mortgage contingency. What does this mean? Basically this is a way for your offer to compete with cash offers. This is not for everyone. Make sure to talk to your real estate broker and your mortgage lender about all the intricacies regarding this option.
Don’t Start Too Low
Don't bother with any lowball offers in 2022. Not only might you offend the seller, but a lowball offer will likely be well below the other offers that they receive. Consult your real estate broker on how to make a competitive offer based on the property's assessed market value. Putting in a strong offer initially will help you stand out to potential sellers.
In addition to starting with a strong offer, you can increase your earnest money. Earnest money is a deposit that protects sellers from a buyer potentially backing out after entering into a purchase agreement. By offering a larger percentage, you can show sellers how serious you are about making the purchase and potentially stand out compared to other offers.
Hire The Right Brokers
Not all brokers are created equal. Each has their own strengths and weaknesses. In today's market, you will want to find a broker who is both an expert in the market you're searching in and who has strong negotiation skills. With the right broker by your side, not only will you be able to craft the strongest offer possible, but you will also have an expert negotiator fighting in your corner. Don't worry, we've got you. The brokers at team Olive Well at Compass have you covered. Meet our brokers here.
Be Flexible
With the housing market favoring sellers, it is not the time to be picky regarding closing details. If you can be flexible to the seller's needs, you can stand out from the competition. For example, hurry the closing process along by shortening the inspection and closing period if possible. Or, if the sellers have a specific day they want to move, be flexible with the move date or even offer to rent the home back to them. Some people are even offering a free rent back to entice the sellers with extra savings. Wait what?! Yep, that's right- many people are closing on their home and allowing the sellers to stay for a period of time for FREE (normally caps out at 60 days). You can also minimize contingencies to make your offer more attractive, but be sure to consult your broker to avoid putting yourself in a bad situation.
Consider a Cash Offer
If you have the means, a cash offer is often the most attractive for sellers. An all-cash offer signals to sellers that it's a very serious offer, plus cash offers tend to have fewer contingencies and faster closing times. In addition, when a buyer makes a cash offer, the seller knows they won't have to wait on lender approval or an appraisal. This will give you a bit more negotiating power if you know that a seller is in a hurry. Cash is king baby.
Keep Your Head Up!
It certainly is a tough market out there. One of the wildest we have ever seen. Inventory is tight, buyers are out and interest rates are on the rise. We have seen clients lose offers for even $200,000 over asking in some cases. Don't get discouraged. The market always ebbs and flows and the spring is the busiest time. If you are a renter that has a lease coming up talk to your landlord about a small extension to buy you some time. In Chicago the market is seasonal and normally slows down in the summer, fall and winter. There will always be another house and each time you lose a bid you will learn how to make your offer stronger and more competitive the next go around. We like to talk about opportunity costs. Even though you might want to bag it and throw in the towel and keep renting for a year consider this. Let's say you keep renting for the next 12 months at a rental rate of $3,000. That's $36,000 you will give away to your landlord to help them pay down their mortgage. Instead you could be putting that money to work for YOU. When you purchase a home you not only get to pay down your principle mortgage balance but also gain appreciation and get tax advantages. Did you know the interest you pay on a mortgage is tax deductible as well as up to $10,000 of your tax payment?
Don't worry you got this! And if you want to drool over our current inventory of properties coming up and on the market check out our listings here.
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