How do you increase the odds that a homeowner will accept your offer when the competition has gotten so fierce because COVID-19 has caused a shortage in inventory? Here are 5 tips to help you win, including a conversation I recommend having with your real estate agent and lender.
Welcome back, everybody. I’m John Voirol, your St. Louis area realtor, and I make real estate-related videos every week to help you keep informed on the St. Louis market. So if you haven’t already, please consider subscribing to my YoutTube Channel so you don’t miss a single video. Right now, we’re dealing with coronavirus, it’s July 2020, and that has had an impact on the St. Louis real estate market. We are seeing an extreme lack of inventory. There aren’t enough listings to meet buyer demand and so what’s happening is buyers are being more and more competitive with one another, and more aggressive in the way that they make their offer. So as a buyer right now, it can feel like you’re swimming upstream against the current and it can be kind of discouraging.
So today I’m sharing with you five of my favorite tips and strategies for helping your offer float to the top of the stack when sellers are reviewing them and getting it accepted. Let’s go.
Okay, so my first tip for you is to get creative with the terms in the contract. It’s not always just about the purchase price or the closing date. Sometimes it’s more nuanced than that. And the way to figure that out is for the buyer’s agent to call the listing agent and ask if there are any contributing factors around the seller’s decision.
For example, some of the things you can do are allow the seller to stay in the house for a certain amount of time after closing. You can offer to pay the seller’s prorated taxes at closing. They’ll owe the amount of the tax bill that’s due from the beginning of the year up until the closing date. So you can offer to pay that and that might just be enough of a bump to make your offer much better than someone else’s that they’re also considering. You can also limit how much you’re able to ask the seller to repair. A common contingency I write is that all parties agree the buyer accepts the home in as is condition except for defects pertaining to the sewer lateral or the structural integrity of the home. That way, as the buyer, you can still do your inspections, you can still walk away if you find something you’re unhappy with, but you’re telling the seller that you’re not going to come in and nitpick over tiny things or ask them to spend a bunch of money on things that don’t matter.
Next tip, write the seller a love letter. And, basically, all that is is a little bit of your own narrative on paper. It’s a love letter from you to the seller explaining why you love the house and the neighborhood, why it’s such a good fit for you, and doing anything that you can to create an emotional connection between you and the seller so they fall in love with you and want to accept your offer. More than once I’ve had a seller accept an offer from one of my buyers when their offer wasn’t the highest, it wasn’t necessarily the most competitive, but those sellers really wanted my clients to have the home because of the letter they wrote. And this may feel uncomfortable for some people but it is getting more and more common as buyers look for the edge anywhere they can find it.
Some of you are gonna hate this next tip but it’s a really important one. Do anything you can not to make your offer contingent on the sale of your current home because, right now, sellers are getting so many offers that those offers are going to the bottom of the stack and it’s really tough to get a house when you have a contingency for the sale of a house you already own. So even if it means you have to sell your house first and move in with family or sell your house first and rent, you do not want your offer to be contingent right now because it’s going to take forever to find a house if you’re even able to secure a contract with that kind of contingency in it.
So here’s another tip for you: show strength in your financing contingency. The financing contingency is what allows you to get out of the contract if you’re not able to secure your loan and it also says what percentage of the purchase price you are putting down as a down payment at closing. So sellers look at that and they say things to themselves like, “Okay, this buyer’s putting 5% down. “Maybe they don’t have enough cash “if something pops up during inspections “to make it to the closing table.” But for all they know, you have enough money to pay cash for the house. So in optimizing your financing contingency, you want to convey to the seller that you are a strong buyer, that you have enough cash to deal with issues, assuming that you do, and you want them to look at that and decide that you are not representing a big risk for them. So I would say chat with your real estate agent, chat with your lender, and come up with a strategy for how you’re going to structure your financing contingency that allows you not to absorb too much risk while looking as competitive as possible. And, of course, if you’re able to, offer cash.
My last tip for you today, and a tip that I give all of my clients when I start working with them, is this: know what the house is worth and then know what the house is worth to you. And here’s what I mean by that. Knowing what the house is worth is pretty straightforward. Your realtor can look at comparable sales and advise you on what they think the house will sell for. It’s probably, in this market, going to go for well over asking price, so that’s where the second piece of that advice kicks in and you need to understand what the house is worth to you. If the house is worth $250k and you’ve been looking for eight months and you’ve written six offers and you’re tired of shopping and you’re about to have a baby, you may need to go ahead and get in that house and that house might be worth $275k for you. You might pay $25k over the asking price in order to secure the deal. And I know that that might sound like a bleak reality but that is what we’re dealing with right now.
So when you go into a negotiation for a home in St. Louis during COVID-19, you need to understand what the house is worth and where your ceiling is in terms of what that house is worth to you.
If you have any questions at all about buying or selling real estate in St. Louis, please don’t hesitate to give me a call at 314-366-0454. I’ll do my best to reply to you and I would love the opportunity to chat with you and be helpful in any way I can. See you guys next time.