3 Ways To Buy a Home in a Hot Market
The market is hot right now. Literally everywhere. Buying a home is hard. It’s a seller’s market all over the country and buyers are losing in multiple bid situations over and over. But there are some ways you can better prep your offers to give you a higher probability of success, even if you don’t have the highest offer.
The Cover Letter
An offer without a cover letter is like going to a job interview without a resume. Your offer is impersonal without a cover letter and your job interview is all conjecture without a resume to back it up. The cover letter serves as the seller’s introduction to your why. Why you want this property. Why you are qualified to buy this property. Why you want your search to end with this property.
And it’s not just your why that gets covered, it’s your who. Who are you? But you do need to be careful in terms of disclosure as you don’t want to invite discrimination or try to curry favor by adding photos or potentially irrelevant information. Just a bit about who you are. Where you came from. How you ended up here. What you do (a stable job is as important right now as your offer price) and how solid your employment is.
It doesn’t matter if you are a great writer or not, it’s what you convey in the cover letter, not how you grammatically convey it. Speak from the heart and you are more likely to connect to someone else’s.
Side note: The tone of the cover letter depends on who the owner is. The best heartfelt cover letters go to an existing homeowner who loves their home. The more mechanical and term-based letters go to LLC owners or absentee owners. And no letters go to banks or REO properties. Know your audience.
The Limiting Language
An offer, in these steaming hot markets, without limiting language regarding inspections is as good as the paper it’s not printed on. In order to put yourself in the best position as a buyer and to remind the seller that you are not here to ticky-tack them to death after inspections, you can use the following limiting language that both protects you and reassures the seller that you aren’t going to ask for the world to be fixed inside or outside their home.
Buyer will limit inspection repair requests to major structural, electrical, plumbing, foundation, environmental, or safety issues.
This basically covers you by using the word major because the word major can be subjectively interpreted. What is major to me might not be major to you, but we can all agree that a loose door handle is not major. Imagine you are a seller choosing between two offers – one with no limiting language about inspection and one with the phrase above. If all other things are equal, which one gives you more confidence in the buyer?
A seller wants to know that you aren’t looking to get back money because you are mad that you had to bid high to win the property. They just want to know you are reasonable. So, be reasonable. But also, use the limiting language.
The Finances
A pre-approval or a cobbled-together proof of funds is not as solid as it could be. If you want to make your financial package rise above the other similar financing contingencies in the pack of offers, deliver your pre-approval and a proof of funds. Why?
A seller wants to know why you are getting a mortgage. They don’t only want cash offers, but if you are getting a mortgage, they want to know that you have some money in the bank for things that may come up. It’s also a confirmation that you have enough cash on hand for the downpayment plus closing costs plus inspections. Confirmation of funds can go a long way in a seller’s eyes.
Again, imagine you have two offers as a seller. Same bid. Same conventional loan. Same percentage down. But imagine that one party shows you a proof of funds that shows they have way more money than they need for the downpayment, along with a note that the mortgage rates are so good they are just taking advantage of what is available.
This is another way to separate yourself. You are pre-explaining why a mortgage will work for the seller. Extra points if your lender has gone the full way and confirmed that they have reviewed your finances and you have enough money in the bank for all of the above. If you have been underwritten in advance, you are way ahead of the game against other offerors.
The Reminder
Your goal is to put your best foot forward. If you don’t want to work to win the house of your dreams, you probably aren’t going to in this kind of market. These three things – the cover letter, the limiting language, and the finances – can propel you from a PDF with letters and numbers into a real-life buyer who is not going to be a pain and who is well qualified to buy this home.
