How do I make an offer in a seller's market?
If you've been checking out the (very few) recent open houses, you know that Boston is in the midst of an absurdly strong seller's market. There is little inventory, home prices are high, and buyers are competing for each listing.
So, how can you make a successful offer in this market? Aside from offering a ton of money in cash, here are some ways to strengthen your offer:
Present a pre-approval letter. This point may be obvious, and it's highly recommended even in a buyer's market. This demonstrates to the seller that you're likely to have the financing to close on the property. With properties selling quickly, you should have this letter in hand before seriously touring homes. You're likely to miss out on the home you saw last Saturday if you're just starting the pre-approval process on Monday.
Start with your best offer. Starting negotiations with a low offer and expecting to "split the difference" might be a good strategy in a used car lot with plenty of inventory. A seller's market, though, is more like a dealership with one car and many shoppers. Remember, you're not in a simple two-party negotiation in today's market. Instead, you're competing with many other potential buyers, and the winning offer will beat its competitors. So, lead with (or very near) your best reasonable offer.
Don't make unnecessary demands. Keep your offer simple. Asking that the seller include unusual concessions in the sale will work against you. Once you're under agreement, you can always ask to buy the seller's furniture, grill, or anything else. Including that in your initial offer will make you look difficult when compared to other buyers.
Shorten the inspection and contingency periods. In a neutral market, a buyer will usually ask for - and get - ten to fourteen days to have a home inspection. By only asking for a shorter period (seven days), you're strengthening your offer by taking some risk away from the seller. If a bad home inspection leads you to back out, the seller will have wasted much less time. Similarly, quicker deadlines for Purchase & Sale and other steps are attractive to the seller.
Accommodate the seller's schedule. Being agreeable to the seller's closing and moving timetable will make your offer stand out among otherwise equal offers. Usually, this means a willingness to act quickly and close early. Each seller is different, though. Find out when the seller wants to move or needs the money and build the offer around the seller's schedule.
Offer a higher deposit. In the greater Boston area, most buyers offer $1,000 as deposit with the offer and a total of 5% when signing the Purchase & Sale Agreement. By offering more than the standard, you demonstrate your commitment to this deal (and accept some more risk).
Write a personal letter. All things being equal, some sellers may favor an offer by a prospective buyer who can articulate his sincere and special interest in the property. This won't make up for a low offer, but it may make the difference among equal bids.