Long Beach is currently in an extremely strong seller’s market. Thanks to historically low-interest rates and a lack of inventory, sellers find themselves closing quickly and for high prices. When it comes to buying a home right now, the competition is no joke.
Finding a home you love, making an offer on it, and losing it to another buyer can be frustrating. Having it happen multiple times? Now that can be demoralizing and depressing.
So how as a buyer do you stack the cards in your favor?
Competing in a Strong Seller’s Market
Here are some things you can do to help yourself stand out amongst other potential buyers:
Become familiar with comparable sales prices and expect to pay market value – or higher. Yes, there are occasionally “deals” out there. However, in many Long Beach neighborhoods and surrounding communities, the average sales price is more than 100% of list price. That can be because the seller priced the home below market value to create a bidding war. Or simply because intense buyer interest drove the price above what other homes have been selling for. We’re now in an “appreciating market” and prices are going up. You may need to structure your offer accordingly.
Have Your Pre-Approval in Hand
Get pre-approved (NOT pre-qualified) with a reputable direct lender, preferably with a loan officer who works in the area you’re looking in. Pre-approval requires submitting your bank statements, tax returns, and paycheck stubs. However, it’s far more powerful to have that than a simple pre-qualification. Most sellers will not even look at your offer without it. Furthermore, due to Coronavirus restrictions, you can’t even see homes on the market before you have your pre-approval.
Also, know that you may have to get cross-qualified or cross-approved with another lender before a particular seller will consider your offer. Keep your paperwork handy in case you need to do this. Don’t take it personally if you’re asked to do so. The seller and listing agent don’t know you or your lender and they want a second opinion from someone they trust.
Don’t Ask for Credit
Don’t ask the seller to credit you for closing costs unless you really need them. Remember, this is a seller’s market and the seller is the one in the driver’s seat so you don’t want to ask too much of them. Furthermore, you may be competing against other buyers who don’t need that credit. All other things being equal, the sellers would probably prefer the offer without the credit if the bottom line is the same as yours.
For example, imagine a home listed for $400,000. Buyers who need a $12,000 credit for closing costs are effectively offering the sellers $388,000. So even if they offer $412,000 to compensate for the closing cost credit, the net to the seller would be less than a straight $400,000 offer. This is because the seller will pay slightly higher commission, tax stamps, plus escrow and title fees. In addition, the property would now need to appraise at a higher value. If you need a credit for closing costs, consider seeing if your lender can structure your loan with a lender credit. Or reach out to family members who may be able to “gift” you funds.
Make a Strong Earnest Money Offer
When you make your offer, you’ll also offer an “earnest money” or “good faith deposit.” If it’s too low, the seller may not think it shows much “good faith.” Sellers like to see that buyers have “skin in the game.” Good faith deposits are typically 1 to 3 percent of the sales price.
Time is of the essence. Act quickly if you see a home you like. In a strong seller’s market homes don’t last on the market very long. If you fall in love with a home, chances are another potential buyer (or two or three) did too. Make sure purchasing this home is right for you, but act fast. Your real estate agent will be able to help you quickly consider the pros and cons of particular homes.
Another way to sweeten the deal is to shorten contingency periods. So if you feel comfortable shortening any of them, do so. Sellers like to know that there’s a shorter period of uncertainty before you’re committed to moving forward.
Appeal to the Sellers
Have your agent explore what’s important to the sellers. What timing are they looking for? What appliances do they plan to include or exclude? Will they need any additional occupancy time after escrow closes? Will they agree to provide termite clearance or a home warranty? The closer your offer is to something the seller can just accept, the better it will be received.
If the seller is a “regular” seller rather than a bank or institutional investor, consider including a personal letter with your offer. Use this letter to tell the sellers a little about yourself and why you like the home. Letters can make a difference, helping you stand out from other buyers.
Use a Local Agent
Work with a local, reputable agent who has connections within the community. If your agent doesn’t return your phone calls, or you find that follow-up is lacking, then other agents may share your opinion. People like to work with people they know – and ones that call them back.
The Shannon Jones Team has been buying and selling real estate in Long Beach for over 20 years. So our agents have developed positive working relationships with many local agents. This benefits our clients, particularly when we’re competing against an offer submitted by an inexperienced or out-of-area agent. These relationships also allow us to hear about some properties before they officially hit the market. In this strong seller’s market, this can be a huge plus. An off-market offer can alleviate many of the headaches that come with being a buyer in a seller’s market.
And develop a thick skin. If your offer isn’t accepted, don’t take it personally. The sellers are simply picking what they think is the best offer. It’s disappointing to be rejected but it isn’t the only house in the world. Keep trying, keep looking, and keep writing offers. Stay positive.
Need Help Navigating this Strong Seller’s Market?
The Shannon Jones Team can help! When you’re a buyer in a seller’s market as strong as this one, you need an expert’s help. We’d be happy to take some of the stress off of you and help you write competitive offers to get you into your dream home. Sound like something you’re interested in? Fill out the form below to get started!