(Nov. 20, 2020) In a strong real estate market with lower inventory, we are experiencing numerous multiple offer situations, especially on the lower price point category of homes that first-time homebuyers would be seeking.
So how can a first-time homebuyer strengthen their chances of beating out other buyers?
This is one of the hardest, but pre-planning and saving is one of the best ways to be a strong buyer in a seller’s market.
This might mean years of preparation to get to save 20 percent for a down payment. But even if you can improve your down-payment situation, let’s say from 3.5 percent down and using FHA, to a 5 percent down conventional loan, this can help improve your chances with a seller who is comparing buyers offers and looking at the financing closely.
The reason conventional buyers many times win out in multiple bid situations over a USDA/no-money down loan or an FHA 3.5 percent down loan is due to the additional layers of scrutiny for both USDA and FHA that can sometimes cause problems during transactions.
Another important concept to keep in mind is that buying a home in real life isn’t like buying a home on HGTV. Rarely do you go see three homes and find the perfect home, and even if you did, in this type of tight inventory market, buyers sometimes have to try on numerous homes before winning the bidding war. And, it can be discouraging when you’ve placed offers on two or three, or especially six or seven homes (no joke, it’s happening).
So, learning from each experience and figuring out where your offer came up short in the bidding war can help you ultimately win.
Buyers may not like the answers they get when asking who won the bid process and how, because in many cases it means taking away normal buyer protections, such as removing contingencies.
A buyer who needs to get a mortgage usually can’t compete with a cash buyer willing to pay the same price. However, there are ways to increase your odds making other contractual changes; for example, a financing buyer up against another financing buyer can include changes such as As-Is inspections (which allows for the right to inspect or As-Is with no-inspections).
— Lauren Bunting is an Associate Broker with Atlantic Shores Sotheby’s International Realty in Ocean City.