Inventory in Oahu is low and the number of people moving here has increased steadily in the past 20 years. Seller’s markets exist when buyers compete for a low inventory of active listings. It’s not unusual for a new listing in the prices below $700,000 to get multiple offers in the first week. If the home is priced at market there may likely be a bidding war. But the price isn’t everything to a seller. There are other factors. If you are trying to buy a home in a seller’s market, here are some suggestions to help you get your offer accepted:
Submit a Preapproval Letter With Your Offer
Getting a preapproval letter from a lender should be done before looking at properties. Most sellers in this market require a letter from your lender that says your credit rating has been examined and you can afford to buy their home. It tells the seller that you are serious, qualified, and will not take extra time to go shopping for a loan after the offer is accepted. Chances are, if the seller has a higher offer from a buyer without a preapproval letter, your offer will likely win.
Make Your Offer as Clean as Possible
If your offer is contingent on the sale of another property or has other requirements it may be a good idea to consider solving these issues beforehand. You may want to consider a bridge loan, rather than jeopardizing the offer. Also, don’t ask for help with closing costs or other concessions outside of the offer price.
Include a Personal Letter
An experienced agent will always include a personal letter with the offer. If the seller has multiple offers and your offer includes a letter that is personally handwritten by you, your offer will stand out. In your letter, explain why you are in love with the seller’s home and include reasons why your offer should win. Sellers like to know something about the new family moving into their neighborhood and it will make them feel good knowing they made a decision based on something other than money.
Write a Friendly Offer
Your goal is to get the offer accepted and to make sure the transaction will close. Avoid making demands on your offer that will likely irritate or anger the seller. Also, keep in mind that the seller’s agent can influence the seller to work with a buyer that is more reasonable.
Offer to Close Quickly
Unless there are extenuating circumstances, many sellers prefer to close within 30 days or fewer. If you can offer a 21-day closing time frame, that might be more important to the seller than an offer for more money and be just the edge you need to beat out the competition.
Don’t Ask for Personal Property
Unless the seller offers furniture or other items as part of the sale, don’t ask for it. Your offer could be very similar in price to another that isn’t asking for items that belong to the seller.
Consider Waiving Some Contingencies
If you feel comfortable risking your deposit, you might want to consider waiving contingencies such as those for loans, appraisals or inspections. However, there are risks. If you waive an appraisal contingency and the home appraises below your sales price, you will need to make up that difference in cash. But without some contingencies, your offer will be more solid than a competitor’s.
This is not the market for making low offers and hoping someone will bite. You will have to make your offer strong enough to beat out a multiple-bid situation. If you really want the house, you’re likely going to have to go above the asking price.
Put Down a Strong Earnest Money Deposit
Your EMD is your proof to the seller that you are good-faith buyer. A larger EMD than is traditionally offered (about 1%-3%) shows that you are a serious buyer and that you fully intend to purchase the property.
Consider Doing Minor Repairs Yourself
The home inspection can kill the deal. Trust the inspector and don’t sweat the small stuff. Minor repairs can add up and stress the seller out. Avoid asking for simple repairs like fixing leaky faucets or tightening toilet bowls.
Add an Escalation Clause
An escalation clause means that your offer will outbid other offers up to a maximum price. This means that you make an offer saying you will pay X price for a home, but if a higher offer is received, you will increase your offer to Y price.
Work With an Experienced and well-known Real Estate Agent
The bidding process in a seller’s market can be complex. I have helped both buyers and sellers in over 4000 transactions over the past 20 years. One important thing about doing business in Hawaii is relationships. I have good relationships with hundreds of agents in Hawaii and around the world.